<PAGE>


                                 EXHIBIT "10.1"












                        BUILD-TO-SUIT SINGLE-TENANT LEASE

                                  (TRIPLE NET)

                                    LANDLORD:

                                LBA-VIF ONE, LLC,

                     A CALIFORNIA LIMITED LIABILITY COMPANY

                                     TENANT:

                              OVERLAND DATA, INC.,

                            A CALIFORNIA CORPORATION













<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                          PAGE (S)
                                                                                                          --------
<S>                                                                                                       <C>
1.       Lease of Premises; Condition Precedent to Lease........................................................3
2.       Term...................................................................................................3
3.       Rent...................................................................................................5
4.       Triple-Net Lease.......................................................................................6
5.       Letter of Credit.......................................................................................6
6.       Use....................................................................................................6
7.       Payments and Notices...................................................................................9
8.       Brokers................................................................................................9
9.       Surrender; Holding Over...............................................................................10
10.      Taxes.................................................................................................10
11.      Repairs...............................................................................................11
12.      Alterations...........................................................................................14
13.      Liens.................................................................................................15
14.      Assignment and Subletting.............................................................................15
15.      Entry by Landlord.....................................................................................17
16.      Utilities and Services................................................................................17
17.      Indemnification and Exculpation.......................................................................17
18.      Damage or Destruction.................................................................................18
19.      Eminent Domain........................................................................................19
20.      Tenant's Insurance....................................................................................20
21.      Waiver of Subrogation.................................................................................22
22.      Tenant's Default and Landlord's Remedies..............................................................22
23.      Landlord's Default....................................................................................24
24.      Subordination.........................................................................................24
25.      Estoppel Certificate..................................................................................25
26.      Modification and Cure Rights of Landlord's Mortgagees and Lessors.....................................25
27.      Quiet Enjoyment.......................................................................................25
28.      Transfer of Landlord's Interest.......................................................................25
29.      Limitation on Landlord's Liability....................................................................25
30.      Miscellaneous.........................................................................................26
31.      Lease Execution.......................................................................................28
32.      Satellite Dishes......................................................................................28
33.      Existing Lease........................................................................................28

</TABLE>


                                      (i)
<PAGE>


                                      INDEX


<TABLE>
<CAPTION>

                                                                                                          PAGE (S)
                                                                                                          --------
<S>                                                                                                       <C>
Abatement Condition.............................................................................................9
Acquisition Date................................................................................................3
ADA.............................................................................................................7
Additional Construction Allowance.......................................................................Exhibit C
Adjustment Date.................................................................................................2
Allowance...............................................................................................Exhibit C
Applicant...............................................................................................EXHIBIT F
Beneficiary.............................................................................................EXHIBIT F
Building Regulations............................................................................................7
Buildings............................................................................................1. Exhibit C
Change Order Cost.......................................................................................Exhibit C
Change Order Delay......................................................................................Exhibit C
Change Order Delay Expense..............................................................................Exhibit C
Commencement Termination Effective Date.........................................................................5
Commencement Termination Notice.................................................................................5
Comparable Buildings...........................................................................................13
Construction Contract...................................................................................Exhibit C
Contractor..............................................................................................Exhibit C
Cure Notice.....................................................................................................9
Declarations....................................................................................................7
Depository.....................................................................................................19
Development Fee.................................................................................................2
Early Occupancy Date............................................................................................3
Effective Date..................................................................................................3
Environmental Law...............................................................................................8
Environmental Permits...........................................................................................8
Extension Option................................................................................................3
Fair Market Rental..............................................................................................4
Final Improvement Cost Summary..................................................................................8
Final Landlord Plan Design Problem......................................................................Exhibit C
Final Landlord Plans....................................................................................Exhibit C
Final Plans.............................................................................................Exhibit C
Final Tenant Plan Design Problem........................................................................Exhibit C
Final Tenant Plans......................................................................................Exhibit C
Force Majeure Delays...........................................................................................27
Hazardous Materials.............................................................................................8
Improvement Cost Summary................................................................................Exhibit C
Improvement Costs...............................................................................................2
Improvements............................................................................................Exhibit C
Indemnified Claims.............................................................................................18
Information.............................................................................................Exhibit C
Inspections.............................................................................................Exhibit C
Insurance Option...............................................................................................21
JAMS...........................................................................................................14
Land Value......................................................................................................2
Landlord........................................................................................................3
Landlord Indemnified Parties....................................................................................8
Landlord TCE...................................................................................................28
Landlord's Architect....................................................................................Exhibit C
Landlord's Architect Contract...........................................................................Exhibit C
Landlord's Reimbursement Cap...................................................................................29
Landlord's Representative...............................................................................Exhibit C
Laws...........................................................................................................13
LC Reduction Conditions.........................................................................................6
Lease...........................................................................................................1
Letter of Credit................................................................................................6
Manufacturing Building..........................................................................................1
Manufacturing Building Allowance........................................................................Exhibit C
Market Rent Data................................................................................................4
Meetings................................................................................................Exhibit C
Memorandum.....................................................................................................26
Monthly Amortization Rent.......................................................................................2
Monthly Base Rent...............................................................................................2
Monthly Rent....................................................................................................2
Non-Disturbance Agreement......................................................................................25
Office Building.................................................................................................1
Office Building Allowance...............................................................................Exhibit C
Option Period...................................................................................................3
Other Landlord.................................................................................................28
Other Lease....................................................................................................28

</TABLE>


                                      (ii)
<PAGE>


<TABLE>
<CAPTION>

                                                                                                          PAGE (S)
                                                                                                          --------
<S>                                                                                                       <C>
Other Premises.................................................................................................29
Outside Date Termination Notice.................................................................................4
Outside Termination Date........................................................................................4
PCBs............................................................................................................8
Permitted Transfer.............................................................................................16
Permitted Transferee...........................................................................................17
Pre-Approved Change............................................................................................14
Preliminary Plans.......................................................................................Exhibit C
Preliminary Shell Plans.................................................................................Exhibit C
Preliminary Tenant Plan Design Problems.................................................................Exhibit C
Preliminary Tenant Plans................................................................................Exhibit C
Proceeds.......................................................................................................19
Property........................................................................................................1
Punch List..............................................................................................Exhibit C
Punch List Items........................................................................................Exhibit C
Real Property Taxes............................................................................................10
Rent............................................................................................................6
Restoration....................................................................................................18
Restore........................................................................................................18
Site Plan.......................................................................................................1
Stated Amount...................................................................................................6
Summary.........................................................................................................1
Target Completion Date..................................................................................Exhibit C
Telecommunications Equipment...................................................................................28
Tenant..........................................................................................................3
Tenant Change..................................................................................................14
Tenant Changes,................................................................................................14
Tenant Improvements.....................................................................................Exhibit C
Tenant Items............................................................................................Exhibit C
Tenant's Contribution...................................................................................Exhibit C
Tenant's Parties................................................................................................8
Tenant's Representative.................................................................................Exhibit C
Term............................................................................................................3
Termination Date...............................................................................................19
Termination Effective Date......................................................................................4
Transfer.......................................................................................................15
Transfer Date..................................................................................................16
Transfer Notice................................................................................................16
Transferee.....................................................................................................16
Warranted Items................................................................................................13
Warranty Period.........................................................................................Exhibit C
Work...........................................................................................................29
Work Cost Estimate......................................................................................Exhibit C
Work Cost Statement.....................................................................................Exhibit C
Work Letter..........................................................................................1. Exhibit C

</TABLE>


                                     (iii)
<PAGE>


               SUMMARY OF BASIC LEASE INFORMATION AND DEFINITIONS

This SUMMARY OF BASIC LEASE INFORMATION AND DEFINITIONS ("SUMMARY") is hereby
incorporated into and made a part of the attached Build-To-Suit Single-Tenant
Lease which pertains to the Premises described in Section 1.3 below. All
references in the Lease to the "LEASE" shall include this Summary. All
references in the Lease to any term defined in this Summary shall have the
meaning set forth in this Summary for such term. Any initially capitalized terms
used in this Summary and any initially capitalized terms in the Lease which are
not otherwise defined in this Summary shall have the meaning given to such terms
in the Lease.

1.1      LANDLORD'S ADDRESS:

                                    LBA-VIF One, LLC
                                    4320 La Jolla Village Drive, Suite 200
                                    San Diego, California  92122
                                    Attn:  David C. Thomas
                                    Telephone:  (858) 625-2700
                                    Facsimile:  (858) 597-0242

         With copy to:              Layton-Belling & Associates
                                    4440 Von Karman Ave., Suite 150
                                    Newport Beach, California  92660
                                    Attn:  Steve Layton

1.2      TENANT'S ADDRESS: Prior to the Commencement Date:

                                    Overland Data, Inc.
                                    8975 Balboa Avenue
                                    San Diego, California  92123
                                    Attn: Michael Gawarecki, Vice-President
                                          Operations
                                    Telephone:  858-495-4191
                                    Facsimile:  858-571-3913*

                                    Following the Commencement Date:

                                    Overland Data, Inc.
                                    ---------------------------------------
                                    ---------------------------------------
                                    Attn: Michael Gawarecki, Vice-President
                                          Operations
                                    Telephone:
                                                -----------------------
                                    Facsimile:
                                                -----------------------

1.3      PREMISES: The real property located in the City of San Diego, County of
         San Diego, State of California and more particularly described in
         Exhibit "A" attached hereto (the "PROPERTY"), together with all
         buildings, improvements and facilities, now or subsequently located on
         the Property from time to time, including, without limitation, the two
         (2) buildings containing, in the aggregate, approximately 140,000
         rentable square feet (collectively, the "BUILDINGS") consisting of (i)
         approximately 55,000 to 60,000 rentable square feet in a two (2) story
         office building (the "OFFICE BUILDING"), and (ii) approximately 80,000
         to 85,000 rentable square feet in a single-story research and
         development building, which may or may not include a mezzanine area
         (the "R & D BUILDING"), each to be constructed on the Property by
         Landlord pursuant to the Work Letter Agreement attached hereto as
         Exhibit "C" (the "WORK LETTER"), together with a parking area to be
         located on the Property exclusively serving the Premises, accommodating
         not less than four (4) parking spaces for every one thousand (1,000)
         rentable square feet in the Office Building and not less than three (3)
         parking spaces for every one thousand (1,000) rentable square feet in
         the R & D Building), all as conceptually shown on the site plan ("SITE
         PLAN") attached hereto as Exhibit "B". All parking spaces shall be
         "standard" size (i.e., non-compact) and shall be provided to Tenant
         without charge throughout the Term, including the Option Period, if
         applicable.

1.4      COMMENCEMENT DATE: The date that is thirty (30) days after the date of
         Substantial Completion of the Improvements (as determined in accordance
         with the Work Letter). Subject to Force Majeure and Tenant Delays,
         Landlord anticipates that Substantial Completion will occur on or about
         February 1, 2002.

1.5      LEASE EXPIRATION DATE: Twelve (12) years following the Commencement
         Date, subject to one (1) extension option of five (5) years pursuant to
         Section 2.4 below. If the Commencement Date occurs on a day other than
         the first day of a month, then for purposes of determining the Lease
         Expiration Date, the twelve (12) year period shall be measured from the
         first day of the month following the month in which the Commencement
         Date occurs.

1.6      MONTHLY RENT: The initial Monthly Rent payable by Tenant hereunder (in
         addition to Tenant's obligation to pay additional rent pursuant to
         Section 3.2 below) shall be equal to the sum of (i) the Monthly Base
         Rent (as defined below)


<PAGE>


         and (ii) the Monthly Amortization Rent (as defined below)
         (collectively, the "MONTHLY RENT") and such Monthly Rent shall, on each
         twenty-four (24) month anniversary of the Commencement Date (each, an
         "ADJUSTMENT DATE"), be increased by five percent (5%) over the Monthly
         Rent payable by Tenant for the period immediately prior to the
         applicable Adjustment Date.

         (a)      The term "MONTHLY BASE RENT" shall mean one twelfth (1/12) of
                  the product obtained by multiplying (1) a fixed rate of
                  interest of eleven percent (11%) by (2) the sum of (i) the
                  Improvement Costs (as defined below), plus (ii) the
                  Development Fee (as defined below) payable to Landlord, plus
                  (iii) the Land Value (as defined below).

         (b)      The term "MONTHLY AMORTIZATION RENT" shall mean the sum of (i)
                  that portion of the brokers' commission paid by Landlord to
                  Tenant's broker in connection with this Lease, and (ii) the
                  Allowance (as defined in Section 9(a) of Exhibit "C",
                  including the Additional Construction Allowance (as defined in
                  Section 9(b) of Exhibit "C")), both fully amortized, based
                  upon equal monthly payments of principal and interest, with
                  interest imputed at the rate of eleven percent (11%) per annum
                  on the outstanding principal balance over a twelve (12) year
                  amortization period commencing on the Commencement Date.

         (c)      The term "IMPROVEMENT COSTS" shall be the sum of all actual
                  and documented out-of-pocket, hard and soft costs and expenses
                  incurred by Landlord with respect to the design, permitting,
                  construction and development of the Improvements (as defined
                  in Exhibit "C"), which shall include, without limitation, any
                  and all construction fees and costs, all fees and costs
                  relative to obtaining any and all permits, other entitlements
                  and third party consents necessary or required in connection
                  with the design, construction and development of the
                  Improvements, costs for the Shell (as defined in Exhibit "C"),
                  the Tenant Improvements (excluding the disbursements of the
                  Allowance which are included in the Monthly Amortization
                  Rent), landscaping, architectural, contractor, consulting,
                  supervision, attorney and engineering fees, construction
                  period taxes (exclusive of any penalties for late-payment or
                  non-payment) and utilities, insurance during construction,
                  related legal expenses, actual and documented construction
                  financing fees and costs (including, but not limited to, the
                  cost of a construction bond (only if required by Landlord's
                  lender and results in a reduction of the rate of interest
                  charged by Landlord's lender on the construction loan)) and
                  interest expense on the hard and soft construction and
                  development costs, an imputed amount for a return on
                  Landlord's equity investment at a rate of eleven percent (11%)
                  per annum, and any and all other actual and documented
                  out-of-pocket fees, costs and expenses actually incurred by
                  Landlord in connection with the construction of the
                  Improvements but not including any internal accounting,
                  management, administrative or other overhead expenses of
                  Landlord except as otherwise provided above.

         (d)      The "DEVELOPMENT FEE" shall be equal to the product of Two and
                  50/100 Dollars ($2.50) multiplied by the total rentable square
                  feet in the Building (including the Office Building and the R
                  & D Building).

         (e)      The term "LAND VALUE" shall be the following amount per gross
                  square foot of land area within the Property: Nineteen and
                  00/100 Dollars ($19.00).

1.7      SECURITY: One Million Five Hundred Thousand Dollars ($1,500,000.00)
         Letter of Credit.

1.8      PERMITTED USE: The Premises may be used only for general office,
         engineering, light manufacturing and warehouse uses and any other
         lawful use consistent with a first-class building which is otherwise
         permitted by applicable zoning ordinances, including, without
         limitation, any use which would be permitted, subject to Landlord's
         reasonable approval, by variance or conditional use permit (the
         obtainment of which (if any) shall be at Tenant's sole cost and expense
         without cost or liability to Landlord whatsoever).

1.9      BROKERS: LBA, Inc. representing Landlord and CB Richard Ellis
         representing Tenant.

1.10     INTEREST RATE: The lesser of: (a) the prime rate announced from time to
         time by Wells Fargo Bank or, if Wells Fargo Bank ceases to exist or
         ceases to publish such rate, then the rate announced from time to time
         by the largest (as measured by deposits) chartered operating bank
         operating in California, plus three percent (3%) per annum; or (b) the
         maximum rate permitted by law.


                                      -2-
<PAGE>


                        BUILD-TO-SUIT SINGLE-TENANT LEASE

This LEASE ("LEASE"), which includes the preceding Summary of Basic Lease
Information and Definitions ("SUMMARY") attached hereto and incorporated herein
by this reference, is made as of the 12th day of October, 2000, by and between
LBA-VIF ONE, LLC, a California limited liability company ("LANDLORD"), and
OVERLAND DATA, INC., a California corporation ("TENANT").

1.       LEASE OF PREMISES; CONDITION PRECEDENT TO LEASE.

1.1      LEASE OF PREMISES; CONDITION PRECEDENT. Landlord hereby leases to
Tenant and Tenant hereby leases from Landlord the Premises upon and subject to
the terms, covenants and conditions contained in this Lease to be performed by
each party. Landlord and Tenant acknowledge that, as of the date of this Lease,
Landlord does not own the Property. In the event Landlord has not completed the
acquisition of the Property on or before February 1, 2001, unless otherwise
agreed in writing by Landlord and Tenant, this Lease shall automatically
terminate and neither party shall have any further obligation to the other
except for those obligations, which by the terms of this Lease, expressly
survive such termination and except for the Letter of Credit which Landlord
shall promptly return to Tenant. The date that Landlord completes such
acquisition of the Property is hereinafter referred to as the "ACQUISITION
DATE".

1.2      MEASUREMENT OF PREMISES. On or before Substantial Completion, Landlord
shall cause Landlord's Architect to measure the rentable square footage of the
Premises and upon such measurement, Landlord shall provide to Tenant Landlord's
calculations with respect thereto. For purposes of this Lease, rentable square
footage of the Premises shall mean Gross Building Area calculated in accordance
with the Standard Method for Measuring Floor Area in Office Buildings ANSI/BOMA
Z65.1-1996. Upon such measurement, Landlord shall determine the calculation of
the Monthly Rent, the Allowance and all other terms that are based on the
rentable square feet in the Premises and such determination shall be confirmed
in the Notice of Lease Term Dates (described below).

2.       TERM.

2.1      TERM; NOTICE OF LEASE DATES. This Lease shall be effective upon the
date first above written (the "EFFECTIVE DATE"). The term of this Lease (the
"TERM") shall commence upon the Commencement Date and shall expire on the Lease
Expiration Date, unless sooner terminated or extended as permitted herein, and
if extended, the "Term" will include the Option Period. Within ten (10) business
days after Landlord's written request, Tenant shall execute a written
confirmation of the Commencement Date and certain other matters as set forth in
the Notice of Lease Term Dates attached hereto as EXHIBIT "D".

2.2      EARLY OCCUPANCY. Landlord shall allow Tenant to enter the Premises when
the construction of the Buildings has proceeded to a point where, consistent
with good construction practices, Tenant can commence preparation of the
Premises for Tenant's occupancy, which early entry period Landlord shall use
commercially reasonable efforts to cause it to commence no later than thirty
(30) days prior to the date Landlord projects for Substantial Completion of the
Improvements (the "EARLY OCCUPANCY DATE") for purposes of installation of
Tenant's furniture, fixtures, equipment and computer and communications cabling.
Landlord shall use commercially reasonable efforts to provide Tenant with
written notice of the projected Early Occupancy Date at least thirty (30) days
prior to such date. Tenant's entry into the Premises from and after the Early
Occupancy Date shall be subject to Tenant's coordination of such entry with
Landlord and Landlord's general contractor(s) so as not to delay and/or
interfere with Landlord's work in the Premises. Such early occupancy shall be
subject to all of the terms and conditions of this Lease, including, without
limitation, those provisions requiring that Tenant shall be responsible for all
costs, expenses and obligations relating to the Premises (including, without
limitation 17, 20 and 22) except that Tenant will not be obligated to pay any
Monthly Rent or the Monthly Management Fee described in Section 3.3 below during
the period of such early occupancy (until the Commencement Date). In addition,
Landlord agrees that neither Tenant, nor any contractor or subcontractor of
Tenant shall be charged for the use of elevators, hoists (if any), water,
electricity, HVAC, security or any other utilities or services prior to the
Commencement Date unless Tenant uses any such services in connection with the
commencement of business operations in the Premises prior to the Commencement
Date.

2.3      OPTION TO EXTEND. Tenant shall have one (1) option (the "EXTENSION
OPTION") to extend the Term for a period (the "OPTION PERIOD") of five (5)
years, commencing upon the Lease Expiration Date upon the same terms and
conditions previously applicable, except for the grant of the exercised
Extension Option and Monthly Rent (which shall be determined as set forth
below). The Extension Option may be validly exercised only by notice in writing
received by Landlord not earlier than three hundred sixty (360) calendar days
and not later than two hundred seventy (270) calendar days prior to commencement
of the Option Period; provided, however, that the Extension Option may be
validly exercised only if no continuing and uncured Tenant default exists as of
the date of exercise. If Tenant does not exercise the Extension Option during
the exercise period set forth above in strict accordance with the provisions
hereof, the Extension Option shall forever terminate and be of no further force
or effect. The Extension Option is personal to the original Tenant, may not be
exercised by any person or entity other than the original Tenant and shall
become null and void if the original Tenant assigns its interest in this Lease
or sublets all or any portion of the Premises, unless (i) such assignment or
sublease is to Permitted Transferee (as defined in Section 14.5 below) or (ii)
such assignment is otherwise


                                      -3-
<PAGE>


approved by Landlord pursuant to Article 14 or (iii) such sublease is to a
subtenant approved by Landlord pursuant to Article 14 and such subtenant
occupies the entire rentable square footage in an entire building (of the
Premises) for the balance of the Initial Term of this Lease.

Monthly Rent during the Option Period shall be equal to Fair Market Rental as of
the commencement of the Option Period. For purposes hereof, "FAIR MARKET RENTAL"
shall mean the base rent payable during the Option Period to a willing landlord
by a willing renewal tenant having a similar financial responsibility, credit
rating and capitalization as Tenant then has, taking into account all other
relevant factors for like and comparable space, improved with tenant
improvements of like and comparable quality to those then existing in the
Premises (taking into account, the age and layout of the then existing
improvements) in the Kearny Mesa area of San Diego and further taking into
account items that professional real estate brokers customarily consider,
including, but not limited to, rental rates (including any market increases over
the applicable term of any such Option Period), space availability, tenant size,
tenant improvement allowances, free rent and any other lease concessions, if
any, then being charged or granted by Landlord or the landlords of such similar
buildings. At least six (6) months prior to the Option Period, Landlord shall
notify Tenant of the Fair Market Rental as determined by Landlord. Any dispute
between the parties hereto with respect to the amount so determined shall be
resolved by arbitration, as set forth below; provided, however, that there shall
be deemed not to be such a dispute unless Tenant notifies Landlord thereof in
writing within thirty (30) days after Landlord so notifies Tenant of the Fair
Market Rental and Tenant sets forth in such notice Tenant's determination of
Fair Market Rental. If, in the event of a dispute, the arbitrators have not
determined the Fair Market Rental by commencement of the Option Period, Tenant
shall continue to pay as Monthly Rent the amount payable by Tenant as of the
month immediately preceding the commencement of the Option Period until such
time as the Fair Market Rental has been determined by arbitration, whereupon
Tenant shall pay any additional amount due to Landlord based upon such
subsequent determination of Fair Market Rental.

If Tenant timely notifies Landlord in writing of Tenant's dispute regarding
Landlord's determination of the Fair Market Rental, then Fair Market Rental
shall be determined as follows. Landlord and Tenant shall each appoint one
arbitrator who shall by profession be a real estate appraiser or commercial real
estate broker active over the ten (10) year period ending on the date of such
appointment in the appraisal of commercial properties in the Kearny Mesa area of
San Diego, California and who shall not have been employed or engaged by either
party during the five (5) year period preceding such appointment. Each such
arbitrator shall be appointed within fifteen (15) days after Tenant notifies
Landlord of Tenant's dispute of Landlord's determination of Fair Market Rental.
The two arbitrators so appointed shall within fifteen (15) days of the date of
the appointment of the last appointed arbitrator agree upon and appoint a third
arbitrator who shall be qualified under the same criteria set forth above. The
arbitrators may hold such hearings and require such briefs as the arbitrators,
in their sole discretion, determine is necessary. In addition, Landlord or
Tenant may submit to the arbitrators with a copy to the other party within five
(5) business days after the appointment of the third arbitrator, any market data
and additional information that such party deems relevant to the determination
of the Fair Market Rental for the Option Period ("MARKET RENT DATA") and the
other party may submit a reply in writing within five (5) business days after
receipt of such Market Rent Data. The three arbitrators shall, within thirty
(30) days of the appointment of the third arbitrator, reach a decision as to
whether the parties shall use Landlord's or Tenant's submitted determination of
Fair Market Rental for the Premises, and shall notify Landlord and Tenant
thereof. Such decision shall be based upon the criteria and variables set forth
above. The new Annual Rent shall thereafter be equal to the Fair Market Rental
of the Premises so selected by the arbitrators. The decision of the majority of
the three arbitrators shall be binding upon Landlord and Tenant. If either
Landlord or Tenant fails to appoint an arbitrator within the time period
specified hereinabove, the arbitrator appointed by one of them shall reach a
decision, notify Landlord and Tenant thereof, and such arbitrator's decision
shall be binding upon Landlord and Tenant. If the two arbitrators fail to agree
upon and appoint a third arbitrator, both arbitrators shall be dismissed and the
matter to be decided shall be forthwith submitted to arbitration under the
provisions of the American Arbitration Association in accordance with the method
described above. The cost of arbitration shall be paid by Landlord and Tenant
equally.

2.4      CONDITIONS PRECEDENT. Landlord will not be obligated to deliver
possession of the Premises to Tenant until Landlord has received from Tenant all
of the following: (i) a copy of this Lease fully executed by Tenant; (ii)
evidence satisfactory to Landlord of the deposit of the Letter of Credit in
accordance with Section 5 below, and the first installment of Monthly Rent in
accordance with Section 3.1 below; and (iii) certificates of insurance as
required under Section 20 of this Lease.

2.5      DELAY IN POSSESSION. In the event that the substantial Completion of
the Improvements (as defined in the Tenant Work Letter) has not occurred by the
"OUTSIDE TERMINATION DATE," which shall be July 1, 2002, as such July 1, 2002
date may be extended by the number of days of Tenant Delays and by the number of
days of Force Majeure Delays (as those terms are defined in the Tenant Work
Letter), then the sole remedy of Tenant shall be the right to deliver a notice
to Landlord (the "OUTSIDE DATE TERMINATION NOTICE") electing to terminate this
Lease effective upon the receipt of the Outside Date Termination Notice by
Landlord ("TERMINATION EFFECTIVE Date"). Except as provided hereinbelow, the
Outside Date Termination Notice must be delivered by Tenant to Landlord, if at
all, not earlier than the Outside Termination Date and not later than ten (10)
business days after the Outside Termination Date. If Tenant delivers the Outside
Date Termination Notice to Landlord, then Landlord shall have the right to
suspend the Termination Effective Date for a period ending thirty (30) days
after the original Termination Effective Date. In order to suspend the
Termination Effective Date, Landlord must deliver to Tenant, within five (5)
business days after receipt of the Outside Date Termination Notice, a
certificate of the Contractor certifying that it is such Contractor's best good
faith judgment that Substantial Completion of


                                      -4-
<PAGE>


the Improvements will occur within thirty (30) days after the original
Termination Effective Date. If Substantial Completion of the Improvements occurs
within said thirty (30) day suspension period, then the Outside Date Termination
Notice shall be of no further force and effect; if, however, Substantial
Completion of the Improvements does not occur within said thirty (30) day
suspension period, then this Lease shall terminate as of the date of expiration
of such thirty (30) day period. If prior to the Outside Termination Date
Landlord determines that Substantial Completion of the Improvements will not
occur by the Outside Termination Date, Landlord shall have the right to deliver
a written notice to Tenant stating Landlord's opinion as to the date by which
Substantial Completion of the Improvements shall occur and Tenant shall be
required, within ten (10) business days after receipt of such notice, to either
deliver the Outside Date Termination Notice (which will mean that this Lease
shall thereupon terminate) or agree to extend the Outside Termination date to
that date which is set by Landlord. Failure of Tenant so to respond in writing
within said ten (10) business day period shall be deemed to constitute Tenant's
agreement to extend the Outside Termination Date to that date which is set by
Landlord. If the Outside Termination Date is so extended, Landlord's right to
request Tenant to elect to either terminate or further extend the Outside
Termination Date shall remain and shall continue to remain, with each of the
notice periods and response periods set forth above, until the Substantial
Completion of the Improvements or until this Lease is terminated. If this Lease
is terminated, neither party shall have any further obligation to the other
except for those obligations, which by the terms of this Lease, expressly
survive such termination and except for the Letter of Credit, which Landlord
shall promptly return to Tenant.

2.6      DELAY IN COMMENCEMENT OF CONSTRUCTION. Despite anything in this Lease
to the contrary and without limitation of any other rights and remedies which
Tenant may have pursuant to this Lease, in the event that Landlord fails to
commence construction of the Improvements (as evidenced by the issuance of a
building permit(s) for the Building(s) and the actual commencement of work by
July 1, 2001 for any reason whatsoever other than Tenant Delays and Force
Majeure Delays (which Tenant Delays and Force Majeure Delays shall be deemed to
extend such July 1, 2001 date), Tenant may terminate this Lease upon written
notice ("COMMENCEMENT TERMINATION NOTICE") to Landlord given within ten (10)
business days thereafter, but prior to the date Landlord notifies Tenant that
Landlord has commenced construction of the Improvements, which termination shall
be effective upon Landlord's receipt of such Commencement Termination Notice
("COMMENCEMENT TERMINATION EFFECTIVE DATE"). Except as provided hereinbelow, the
Commencement Termination Notice must be delivered by Tenant to Landlord, if at
all, not earlier than July 1, 2001 and not later than ten (10) business days
after such date. If Tenant delivers the Commencement Termination Notice to
Landlord, then Landlord shall have the right to suspend the Commencement
Termination Effective Date for a period ending thirty (30) days after the
original Commencement Termination Effective Date. In order to suspend the
Commencement Termination Effective Date, Landlord must deliver to Tenant, within
five (5) business days after receipt of the Commencement Termination Notice, a
certificate of the Contractor certifying that it is such Contractor's best good
faith judgment that commencement of construction of the Improvements will occur
within thirty (30) days after the original Commencement Termination Effective
Date. If commencement of construction of the Improvements occurs within said
thirty (30) day suspension period, then the Commencement Termination Notice
shall be of no further force and effect; if, however, commencement of
construction of the Improvements does not occur within said thirty (30) day
suspension period, then this Lease shall terminate as of the date of expiration
of such thirty (30) day period. If prior to July 1, 2001 Landlord determines
that commencement of construction of the Improvements will not occur by July 1,
2001 (as such date may be extended due to Tenant Delays and Force Majeure
Delays), Landlord shall have the right to deliver a written notice to Tenant
stating Landlord's opinion as to the date by which commencement of construction
of the Improvements shall occur and Tenant shall be required, within ten (10)
business days after receipt of such notice, to either deliver the Commencement
Termination Notice (which will mean that this Lease shall thereupon terminate)
or agree to extend the July 1, 2001 date (as such date may be extended due to
Tenant Delays and Force Majeure Delays) to that date which is set by Landlord.
Failure of Tenant so to respond in writing within said ten (10) business day
period shall be deemed to constitute Tenant's agreement to extend the July 1,
2001 date (as such date may be extended due to Tenant Delays and Force Majeure
Delays) to that date which is set by Landlord. If the July 1, 2001 date (as such
date may be extended due to Tenant Delays and Force Majeure Delays) is so
extended, Landlord's right to request Tenant to elect to either terminate or
further extend the July 1, 2001 date (as such date may be extended due to Tenant
Delays and Force Majeure Delays) shall remain and shall continue to remain, with
each of the notice periods and response periods set forth above, until the
commencement of construction of the Improvements or until this Lease is
terminated. Upon any such termination, Landlord and Tenant shall each be
released from their respective obligations under this Lease, except for those
obligations, which by the terms of this Lease, expressly survive such
termination and except for the Letter of Credit, which Landlord shall promptly
return to Tenant; provided however, under no circumstances will Landlord be
entitled to any reimbursement from Tenant for any costs incurred by Landlord in
connection with the construction of the Premises by Landlord.

3.       RENT.

3.1      MONTHLY RENT. Tenant agrees to pay Landlord, as rent for the Premises,
the Monthly Rent designated in Section 1.6 of the Summary. The Monthly Rent
shall be paid by Tenant in advance on the first day of each and every calendar
month commencing upon the Commencement Date. Monthly Rent for any partial month
shall be prorated in the proportion that the number of days this Lease is in
effect during such month bears to the actual number of days in such month.

3.2      ADDITIONAL RENT. All amounts and charges payable by Tenant under this
Lease in addition to the Monthly Rent described in Section 3.1 above shall be
considered additional rent for the purposes of this


                                      -5-
<PAGE>


Lease, and the word "RENT" in this Lease shall include such additional rent
unless the context specifically or clearly implies that only the Monthly Rent is
referenced. Rent shall be paid to Landlord as provided in Section 7, without any
prior demand therefor and without any deduction or offset except as specified
elsewhere in the Lease, in lawful money of the United States of America.

3.3      MANAGEMENT FEE. Tenant shall pay to Landlord, as additional rent, a
monthly management fee equal to one quarter of one percent (0.25%) of the
Monthly Rent. Such fee shall be payable concurrently with Monthly Rent.

3.4      LATE PAYMENTS. Late payments of Rent will be subject to interest and a
late charge as provided in Sections 22.6 and 22.7 below.

4.       TRIPLE-NET LEASE. Except as otherwise provided herein, all Rent shall
be net to Landlord so that this Lease shall yield net to Landlord, the Rent to
be paid each month during the Term of this Lease. Accordingly, and except as
otherwise provided herein, all costs, expenses and obligations of every kind or
nature whatsoever relating to the Premises which may arise or become due during
the Term of this Lease shall be paid by Tenant. Nothing herein contained shall
be deemed to require Tenant to pay or discharge any liens or mortgages of any
character whatsoever which may exist or hereafter be placed upon the Premises by
an affirmative act or omission of Landlord.

5.       LETTER OF CREDIT.

5.1      LETTER OF CREDIT. Concurrently with Tenant's execution and delivery of
this Lease to Landlord, Tenant shall deliver to Landlord security substantially
in the form of an unconditional, irrevocable and renewable letter of credit
("LETTER OF CREDIT") in favor of Landlord in the form attached hereto as Exhibit
"G", issued by a bank reasonably satisfactory to Landlord with a branch located
in the City of San Diego, California, in the principal amount ("STATED AMOUNT")
specified below, as security for the faithful performance and observance by
Tenant of the terms, provisions and conditions of this Lease throughout the
entire Lease Term. Tenant shall pay all expenses, points and/or fees incurred by
Tenant in obtaining the Letter of Credit; provided, however, that Landlord
acknowledges and agrees that in the event this Lease is terminated in accordance
with Section 1.1 above, Landlord shall reimburse to Tenant the actual,
documented and reasonable costs paid by Tenant to have said Letter of Credit
issued. The Stated Amount of the Letter of Credit shall initially be One Million
Five Hundred Thousand Dollars ($1,500,000.00); provided, however, that so long
as (i) Tenant is not then in default under this Lease (beyond the expiration of
any applicable notice and cure period), (ii) Tenant has a tangible net worth
(calculated as provided below) of no less than Forty Million Dollars
($40,000,000.00), and (iii) Tenant's debt equity ratio (determined as provided
below) is twenty-five percent (25%) or less (collectively, the "LC REDUCTION
CONDITIONS"), then (i) on the second (2nd) annual anniversary of the Acquisition
Date the then Stated Amount shall (so long as all of the LC Reduction Conditions
are satisfied as of such date) be reduced by Five Hundred Thousand Dollars
($500,000.00), and (ii) on the third (3rd) annual anniversary of the Acquisition
Date, Landlord shall (so long as all of the foregoing LC Reduction Conditions
are satisfied as of such date) waive the Letter of Credit requirement; provided,
however, that in the event all of the LC Reduction Conditions are not satisfied
as of the third (3rd) anniversary of the Commencement Date then Landlord agrees
to cancel and waive the Letter of Credit requirement in the event all of the LC
Reduction Conditions are satisfied at any time after the third anniversary of
the Commencement Date. For purposes of this Section 5.1, the calculation of "net
worth" and the determination of the "debt equity ratio" shall each be in
accordance with generally accepted accounting principles and evidenced by a
balance sheet prepared by Tenant and filed with the Securities and Exchange
Commission.

5.2      APPLICATION OF LETTER OF CREDIT. The Letter of Credit shall be held by
Landlord as security for the faithful performance by Tenant of all of the terms,
covenants and conditions of this Lease. If Tenant commits a default with respect
to any provision of this Lease (and such default is not cured within the
applicable notice and cure period) or if the term of the Letter of Credit held
by Landlord is scheduled to expire prior to the last day of the Lease Term, and
the term of the Letter of Credit is not extended at least thirty (30) days prior
to the scheduled date of expiration of the Letter of Credit and such failure to
so extend the Letter of Credit continues for an additional two (2) business days
after Tenant's receipt of Landlord's written notice of such failure, Landlord
may (but shall not be required to) draw upon the entire principal amount of the
Letter of Credit, and Landlord may then use, apply or retain all or any part of
the proceeds for the payment of any sum which is in default, or for the payment
of any other amount which Landlord may spend or become obligated to spend by
reason of Tenant's default or to compensate Landlord for any loss or damage
which Landlord may suffer by reason of Tenant's default. If any portion of the
Letter of Credit proceeds are so used or applied, Tenant shall, within ten (10)
days after demand therefor, post an additional Letter of Credit in an amount to
cause the aggregate amount of the unused proceeds and such new Letter of Credit
to equal the then Stated Amount required in this Article 5. Landlord shall not
be required to keep any proceeds from the Letter of Credit separate from its
general funds. Should Landlord sell its interest in the Premises during the
Lease Term and if Landlord deposits with the purchaser thereof the Letter of
Credit and any proceeds of the Letter of Credit, thereupon Landlord shall be
discharged from any further liability with respect to the Letter of Credit and
said proceeds.

6.       USE.

6.1      GENERAL. Tenant shall use the Premises solely for the Permitted Use
specified in Section 1.8 of the Summary, and shall not use or permit the
Premises to be used for any other use or purpose


                                      -6-
<PAGE>


whatsoever. Tenant shall, at its sole cost and expense, observe and comply with
all requirements of any board of fire underwriters or similar body relating to
the Premises, all recorded covenants, conditions and restrictions now or
hereafter of record affecting the Premises including, but not limited to, that
certain Declaration of Covenants, Conditions and Restrictions for San Diego
Spectrum recorded on September 16, 1999 as Instrument No. 99-0635988, in the
Official Records of the San Diego County Recorder's Office and those certain San
Diego Spectrum Signage Guidelines dated November 11, 1999, both of which are
incorporated herein by this reference, as amended from time to time and such
other covenants, conditions and restrictions from time to time encumbering the
Premises and any by-laws and rules and regulations promulgated thereunder
(collectively, the "DECLARATIONS"), and all laws, statutes, codes, reasonable
and non-discriminatory rules and regulations now or hereafter in force relating
to or affecting the condition, use, occupancy, alteration or improvement
(whether structural or non-structural, including unforeseen and/or extraordinary
alterations or improvements, and regardless of the period of time remaining in
the Term) of the Premises, including, without limitation, the provisions of the
Americans with Disabilities Act and the California Disability Access Laws and
their respective implementing regulations (collectively the "ADA") as it
pertains to the condition, use, occupancy, improvement and alteration (whether
structural or non-structural, including unforeseen and/or extraordinary
alterations or improvements, and regardless of the period of time remaining in
the Term) of the Premises. Tenant shall not use or allow the Premises to be used
(a) in violation of the Declarations or of any law or governmental rule or
regulation, or of any certificate of occupancy issued for the Premises, or (b)
for any improper or unlawful purpose. Tenant shall not cause, maintain or permit
any nuisance in, on or about the Premises, nor commit or suffer to be committed
any waste in, on or about the Premises. Notwithstanding anything in this Lease
to the contrary, Landlord represents and warrants to Tenant that as of the
Commencement Date, the Buildings, including, without limitation the restrooms,
and the Common Areas of the Project (including, without limitation the parking
areas) shall be in full compliance with the ADA and all other applicable
building codes and regulations in effect on the Commencement Date and then being
enforced against Landlord (hereinafter collectively "BUILDING REGULATIONS"). If
within the one (1) year period following the Commencement Date, Tenant provides
Landlord with written notice that any portion of the Buildings or the Project is
not in compliance with the Building Regulations, Landlord shall, at its sole
cost and expense, promptly make such alterations as may be required to bring the
Buildings and/or Project into full compliance with such the Building
Regulations.

6.2      SIGNS, AWNINGS AND CANOPIES. Subject to all applicable governmental
laws, rules, regulations and codes, Tenant (and any Permitted Transferee of
Tenant or any other transferee approved by Landlord who occupies either an
entire building (either the R & D Building or the Office Building) or at least
fifty percent (50%) of the total rentable area of the Buildings) shall have the
right to install upon the Premises two (2) exterior signs on the Office Building
and two (2) exterior signs on the R & D Building (provided, however, that in no
event shall the maximum number of exterior signs exceed two (2) exterior signs
on each such building), together with a monument-type sign in front of each
entrance to the Office Building and the R & D Building, provided Tenant complies
with the Declarations and obtains approval from all governmental authorities
having jurisdiction over the Premises and from Landlord, which approval shall
not be unreasonably withheld, conditioned or delayed. If Landlord fails to
respond to any written request for such approval from Tenant within ten (10)
days of Landlord's receipt of such request and if such failure continues for an
additional five (5) days after Landlord's receipt of Tenant's second request
(which second request shall reference this Section 6.2 and shall state that
Landlord's failure to respond shall be deemed Landlord's approval of Tenant's
request for Landlord's approval of the signage criteria set forth in such second
request), Tenant's request shall be deemed approved. Tenant hereby acknowledges
that, notwithstanding Landlord's approval of such exterior signage and/or the
signage specifications therefor, Landlord has made no representations or
warranty to Tenant with respect to the probability of obtaining such approvals
and permits. In the event Tenant does not receive the necessary permits and
approvals for such exterior signage, Tenant's and Landlord's rights and
obligations under the remaining provisions of this Lease shall not be affected.
The cost of installation of such exterior signage, as well as all costs of
design and construction of such exterior signage and all other costs associated
with such exterior signage, including, without limitation, permits, maintenance
and repair, shall be the sole responsibility of Tenant. Tenant agrees to
maintain any such sign, awning, canopy, decoration, lettering or advertising
matter as may be approved by Landlord in good condition and repair at all times.
At the expiration or earlier termination of this Lease, at Landlord's election,
Tenant shall remove all signs, awnings, canopies, decorations, lettering and
advertising installed by or at the direction of Tenant and shall repair any
damage to the Premises resulting therefrom (including any discoloration of the
Building and monuments (if any)) all at Tenant's sole cost and expense. If
Tenant fails to maintain any such approved sign, awning, decoration, lettering,
or advertising, Landlord may, following an additional five (5) days written
notice to Tenant, do so and Tenant shall reimburse Landlord for the actual and
documented out-of -pocket cost of such work. If, without Landlord's prior
written consent, Tenant installs any sign, awning, decoration, lettering or
advertising, or fails to remove any such item(s) within ten (10) days of the
date of the expiration or earlier termination of this Lease, Landlord may,
following five (5) days written notice to Tenant, have such item(s) removed and
stored and may repair any damage to the Premises at Tenant's expense. The
removal, repair and/or storage costs shall be repaid to Landlord within ten (10)
days of Tenant's receipt of an invoice therefore and shall bear interest
thereafter until paid at the Interest Rate. Except as provided in this Section
6.2 above, Tenant may not install any signs on the exterior or roof of the
Building or anywhere else in the Project (except for Tenant's interior signage).

6.3      HAZARDOUS MATERIALS.

6.3.1    TENANT'S ENVIRONMENTAL REPRESENTATIONS AND INDEMNIFICATION. Tenant will
(i) obtain and maintain in full force and effect all Environmental Permits (as
defined below) that may be required from time to time under any Environmental
Laws (as defined below) applicable to Tenant's use and occupancy


                                      -7-
<PAGE>


of the Premises and (ii) be and remain in compliance in with all terms and
conditions of all such Environmental Permits and with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in all Environmental Laws applicable to
Tenant's use and occupancy of the Premises. As used in this Lease, the term
"ENVIRONMENTAL LAW" means any past, present or future federal, state or local
statutory or common law, or any regulation, ordinance, code, plan, order,
permit, grant, franchise, concession, restriction or agreement issued, entered,
promulgated or approved thereunder, relating to (a) the environment, human
health or safety, including, without limitation, emissions, discharges, releases
or threatened releases of Hazardous Materials (as defined below) into the
environment (including, without limitation, air, surface water, groundwater or
land), or (b) the manufacture, generation, refining, processing, distribution,
use, sale, treatment, receipt, storage, disposal, transport, arranging for
transport, or handling of Hazardous Materials. "ENVIRONMENTAL PERMITS" means,
collectively, any and all permits, consents, licenses, approvals and
registrations of any nature at any time required as a result of Tenant's use and
occupancy of the Premises pursuant to, or in order to comply with, any
Environmental Law. Except for ordinary and general office supplies, such as
copier toner, liquid paper, glue, ink and common cleaning materials and, to the
extent approved in writing by Landlord (which shall not be unreasonably
withheld, conditioned or delayed), materials reasonably necessary for the
conduct of Tenant's business that are used and stored in compliance with all
Environmental Laws (some or all of which may constitute "Hazardous Materials" as
defined in this Lease), Tenant agrees not to cause or permit any Hazardous
Materials to be brought upon, stored, used, handled, generated, released or
disposed of on, in, under or about the Premises by Tenant, its agents,
employees, subtenants, assignees, licensees, contractors or invitees
(collectively, "TENANT'S PARTIES"), without the prior written consent of
Landlord, which consent Landlord may withhold in its sole and absolute
discretion. Concurrently with the execution of this Lease, Tenant agrees to
complete and deliver to Landlord an Environmental Questionnaire in the form of
Exhibit "E" attached hereto. Upon the expiration or earlier termination of this
Lease, Tenant agrees to promptly remove from the Premises, at its sole cost and
expense, any and all Hazardous Materials, including any equipment or systems
containing Hazardous Materials which are installed, brought upon, stored, used,
generated or released upon, in, under or about the Premises by Tenant or any of
Tenant's Parties. To the fullest extent permitted by law, Tenant agrees to
promptly indemnify, protect, defend and hold harmless Landlord and Landlord's
partners, officers, directors, employees, agents, successors and assigns
(collectively, "LANDLORD INDEMNIFIED PARTIES") from and against any and all
claims, damages, judgments, suits, causes of action, losses, liabilities,
penalties, fines, expenses and costs (including, without limitation, clean-up,
removal, remediation and restoration costs, sums paid in settlement of claims,
attorneys' fees, consultant fees and expert fees and court costs) which arise or
result from the presence of Hazardous Materials on, in, under or about the
Premises and which are caused or permitted by Tenant or any of Tenant's Parties.
Tenant agrees to promptly notify Landlord of any release of Hazardous Materials
of which Tenant obtains actual knowledge during the Term of this Lease, whether
caused by Tenant or any other persons or entities. In the event of any release
of Hazardous Materials caused or permitted by Tenant or any of Tenant's Parties,
Landlord shall have the right, but not the obligation, to cause Tenant to
immediately take all steps Landlord deems reasonably necessary or appropriate to
remediate such release and prevent any similar future release to the
satisfaction of Landlord and Landlord's mortgagee(s). At all times during the
Term of this Lease, Landlord will have the right, but not the obligation,
following reasonable advance written notice to Tenant (except in the case of an
emergency when no notice shall be required) to enter upon the Premises to
inspect, investigate, sample and/or monitor the Premises to determine if Tenant
is in compliance with the terms of this Lease regarding Hazardous Materials.
Tenant will, upon the written request of Landlord (which request shall be made
no more frequently than one (1) time per calendar year), cause to be performed
an environmental audit of the Premises at Tenant's expense by an environmental
consulting firm reasonably acceptable to Landlord. As used in this Lease, the
term "HAZARDOUS MATERIALS" shall mean and include any hazardous or toxic
materials, substances or wastes as now or hereafter designated or regulated
under any law, statute, ordinance, rule, regulation, order or ruling of any
agency of the State, the United States Government or any local governmental
authority, including, without limitation, asbestos, petroleum, petroleum
hydrocarbons and petroleum based products, urea formaldehyde foam insulation,
polychlorinated biphenyls ("PCBS"), and freon and other chlorofluorocarbons. The
provisions of this Section 6.3.1 will survive the expiration or earlier
termination of this Lease.

6.3.2    LANDLORD'S INDEMNIFICATION. Landlord shall indemnify, protect, defend
and hold Tenant, its successors, assigns, subtenants, agents, employees,
officers and directors harmless from any and all losses, damages, liabilities,
judgments, costs, claims, expenses, penalties, including, but not limited to,
attorneys' fees, court costs and consultant fees arising out of or involving any
Hazardous Materials introduced to the Premises by Landlord to the extent that
the same were Hazardous Materials at the time of such introduction to the
Premises.

6.3.3    LANDLORD TERMINATION OPTION FOR CERTAIN ENVIRONMENTAL PROBLEMS. If
Hazardous Materials are present at the Premises that are required by
Environmental Law to be remediated and Tenant is not responsible therefor
pursuant to Section 6.3.1 and Landlord is not responsible therefor pursuant to
Section 6.3.2, Landlord may, at its option, either (i) remediate such Hazardous
Materials at its expense, in which event this Lease shall continue in full force
and effect or (ii) if the estimated cost to remediate such Hazardous Materials
exceeds twelve (12) times the then Monthly Rent, give written notice to Tenant,
within thirty (30) days after receipt by Landlord of knowledge of the existence
of such Hazardous Materials, of Landlord's desire to terminate this Lease as of
the date sixty (60) days following the date of such notice. In the event
Landlord elects to give such a termination notice, Tenant may, within ten (10)
days thereafter, give written notice to Landlord of Tenant's commitment to pay
the amount by which the cost of the remediation of such Hazardous Materials
exceeds an amount equal to twelve (12) times the then Monthly Rent. Tenant shall
provide Landlord with such funds or satisfactory assurance thereof


                                      -8-
<PAGE>


within thirty (30) days following such commitment. In such event, this Lease
shall continue in full force and effect, and Landlord shall proceed to make such
remediation as soon as reasonably possible after the required funds are
available. If Tenant does not give such notice and provide the required funds or
assurance thereof within the time provided, this Lease shall terminate as the
date specified in Landlord's termination notice. Notwithstanding anything above
to the contrary, if Tenant is prevented from using all or a portion of the
Premises for its normal business operations, and Tenant does not, in fact, use
all or such portion of the Premises, for a period of five (5) consecutive
business days or more after written notice of such condition is delivered to
Landlord, due solely to Landlord's work of remediation of Hazardous Materials
pursuant to the terms of this Section 6.3.3, the following provisions of this
Section 6.3.3 shall apply (the condition set forth above to be known as the
"ABATEMENT CONDITION"). To the extent the Abatement Condition affects only a
portion of the Premises, and such portion is a material portion of the Premises,
and Tenant is not reasonably able to conduct its business from the remaining
portion of the Premises, the Abatement Condition shall be deemed to affect the
entire Premises. Tenant shall promptly deliver to Landlord notice (the "CURE
NOTICE") of such condition and if Landlord fails to cure such condition within
five (5) business days after delivery to it of the Cure Notice, then the Monthly
Base Rent applicable to the affected portion of the Premises shall be abated
from the expiration of said five (5) day period until the date when such failure
is cured; provided, however, that if Tenant has previously paid Monthly Base
Rent to Landlord for a period of time subsequent to the commencement of Tenant's
right to abate Monthly Base Rent hereunder, then Landlord shall, within ten (10)
business days following the date of such abatement, credit to Tenant an amount
equivalent to such excess payments against the Monthly Base Rent next due under
this Lease, or, if after the expiration or termination of this Lease, reimburse
to Tenant the amount of such excess payments. Except as provided above, there
shall be no Rent abatement resulting from the existence of such Hazardous
Materials or performance of Landlord's remediation.

6.4      REFUSE AND SEWAGE. Tenant agrees not to keep any trash, garbage, waste
or other refuse on the Premises except in proper containers and agrees to
contract directly for the regular removal of the same from the Premises. Tenant
shall keep all containers or other equipment used for storage of such materials
in a clean and sanitary condition. Tenant shall, at Tenant's sole cost and
expense, properly dispose of all sanitary sewage and shall not use the sewage
disposal system for the disposal of anything except sanitary sewage. Tenant
shall keep the sewage disposal system free of all obstructions and in good
operating condition. Tenant shall contract directly for all trash disposal
services at Tenant's sole cost and expense.

6.5      ACCESS/SECURITY SYSTEM. Landlord acknowledges that, subject to Force
Majeure events and the requirements of applicable laws, the Premises shall be
accessible to Tenant twenty-four (24) hours per day, seven (7) days per week,
every day of the year, including holidays. Landlord acknowledges that as a part
of the Tenant Improvements, Tenant may elect to install an automated security
system in, on, or about the Premises, including, without limitation, a
card-reader access system for access through all exterior doors of the Buildings
which shall be programmable and controlled by a computer system located within
the Buildings and capable of remote access by employees of Tenant. Landlord
shall have the right to review and approve or disapprove the plans in Landlord's
reasonable discretion as provided in the Work Letter. Landlord agrees that
Tenant shall have the right, upon the expiration or termination of this Lease,
to remove the security system; provided however, Tenant shall, at its sole cost,
repair any damage caused by such removal.

7.       PAYMENTS AND NOTICES. All Rent and other sums payable by Tenant to
Landlord hereunder shall be paid to Landlord at the address designated in
Section 1.1 of the Summary, or to such other persons and/or at such other places
as Landlord may hereafter designate in writing. Any notice required or permitted
to be given hereunder must be in writing and given by personal delivery
(including delivery by nationally recognized overnight courier or express
mailing service), facsimile transmission sent by a machine capable of confirming
transmission receipt, with a hard copy of such notice delivered no later than
one (1) business day after facsimile transmission by another method specified in
this Section 7, or by registered or certified mail, postage prepaid, return
receipt requested, addressed to Tenant at the address(es) designated in Section
1.2 of the Summary, or to Landlord at the address(es) designated in Section 1.1
of the Summary. Either party may, by written notice to the other, specify a
different address for notice purposes. Notice given in the foregoing manner
shall be deemed given (i) upon confirmed transmission if sent by facsimile
transmission, provided such transmission is prior to 5:00 p.m. on a business day
(if such transmission is after 5:00 p.m. on a business day or is on a
non-business day, such notice will be deemed given on the following business
day), (ii) when actually received or refused by the party to whom sent if
delivered by a carrier or personally served or (iii) if mailed, on the day of
actual delivery or refusal as shown by the certified mail return receipt or the
expiration of three (3) business days after the day of mailing, whichever first
occurs. For purposes of this Section 7, a "business day" is Monday through
Friday, excluding holidays observed by the United States Postal Service.

8.       BROKERS. The parties recognize that the brokers ("Brokers") who
negotiated this Lease are stated in Section 1.9 of the Summary and that Landlord
shall be solely responsible for the payment of the brokerage commission directly
to the Brokers and that Tenant shall have no obligation or responsibility
therefor. Landlord shall have no further or separate obligation for payment of
commissions or fees to any other real estate broker, finder or intermediary
other than the Brokers specified in Section 1.9 of the Summary. Tenant
represents that it has not had any dealings with any real estate broker, finder
or intermediary with respect to this Lease, other than the brokers specified in
Section 1.9 of the Summary as representing Tenant. Each party represents and
warrants to the other, that, to its knowledge, no other broker, agent or finder
(a) negotiated or was instrumental in negotiating or consummating this Lease on


                                      -9-
<PAGE>


its behalf, or (b) is or might be entitled to a commission or compensation in
connection with this Lease. Tenant shall indemnify, protect, defend (by counsel
reasonably approved in writing by Landlord) and hold Landlord harmless from and
against any and all claims, judgments, suits, causes of action, damages, losses,
liabilities and expenses (including attorneys' fees and court costs) resulting
from any breach by Tenant of the foregoing representation, including, without
limitation, any claims that may be asserted against Landlord by any broker,
agent or finder undisclosed by Tenant herein. Landlord shall indemnify, protect,
defend (by counsel reasonably approved in writing by Tenant) and hold Tenant
harmless from and against any and all claims, judgments, suits, causes of
action, damages, losses, liabilities and expenses (including attorneys' fees and
court costs) resulting from any breach by Landlord of the foregoing
representation, including, without limitation, any claims that may be asserted
against Tenant by any broker, agent or finder undisclosed by Landlord herein.
The foregoing indemnities shall survive the expiration or earlier termination of
this Lease.

9.       SURRENDER; HOLDING OVER.

9.1      SURRENDER OF PREMISES. Upon the expiration or sooner termination of
this Lease, Tenant shall surrender all keys for the Premises to Landlord, and
Tenant shall deliver exclusive possession of the Premises to Landlord broom
clean and in first-class condition and repair, reasonable wear and tear excepted
(and casualty damage excepted if this Lease is terminated as a result thereof
pursuant to Section 18), with all of Tenant's personal property (and those
items, if any, of Tenant Improvements and Tenant Changes identified by Landlord
pursuant to Section 12.2 below) removed therefrom and all damage caused by such
removal repaired, as required pursuant to Sections 12.2 and 12.3 below. If, for
any reason, Tenant fails to surrender the Premises within ninety (90) days of
the date of the expiration or earlier termination of this Lease, with such
removal and repair obligations completed, then, in addition to the provisions of
Section 9.3 below and Landlord's rights and remedies under Section 12.4 and the
other provisions of this Lease, Tenant shall indemnify, protect, defend (by
counsel reasonably approved in writing by Landlord) and hold Landlord harmless
from and against any and all claims, judgments, suits, causes of action,
damages, losses, liabilities and expenses (including attorneys' fees and court
costs) resulting from such failure to surrender, including, without limitation,
any claim made by any succeeding tenant based thereon. The foregoing indemnity
shall survive the expiration or earlier termination of this Lease.

9.2      HOLDING OVER. If Tenant holds over after the expiration or earlier
termination of the Lease Term, without Landlord's express written consent, then,
without waiver of any right on the part of Landlord as a result of Tenant's
failure to timely surrender possession of the Premises to Landlord, Tenant shall
become a tenant at sufferance only, upon the terms and conditions set forth in
this Lease so far as applicable (including Tenant's obligation to pay all costs,
expenses and any other additional rent under this Lease), but at a Monthly Rent
equal to a percentage of the Monthly Rent applicable to the Premises immediately
prior to the date of such expiration or earlier termination, which percentage
shall be (i) one hundred fifty percent (150%) for the first two (2) months of
such holding over and (ii) two hundred percent (200%) thereafter. Acceptance by
Landlord of rent after such expiration or earlier termination shall not
constitute a consent to a hold over hereunder or result in an extension of this
Lease.

9.3      HOLDING OVER WITH LANDLORD'S CONSENT. Notwithstanding the foregoing, by
written notice to Landlord given at least twelve (12) months prior to the
expiration of the initial Term or the Option Period, Tenant shall have a
one-time right to elect to holdover in the Premises (which holdover will be
deemed to be with Landlord's consent) for a fixed term of three (3) full months
at one hundred fifty percent (150%) of the Monthly Rent and additional rent in
effect under this Lease immediately prior to such holdover, and such continued
occupancy by Tenant shall be subject to all of the other terms, covenants and
conditions of this Lease, so far as applicable. The Term will be extended for
such three (3) month period and a vacation of the Premises by Tenant prior to
such date will not relieve Tenant of liability for Monthly Rent and additional
rent accruing under this Lease through the expiration of the Term, as extended
pursuant to Tenant's notice. Any holding over by Tenant after such three (3)
month period shall be at two hundred percent (200%) of the Monthly Rent and
additional rent in effect under this Lease immediately prior to such holdover.
The provisions of this Section 9.3 will survive the expiration or earlier
termination of this Lease.

9.4      NO EFFECT ON LANDLORD'S RIGHTS. The foregoing provisions of this
Section 9 are in addition to, and do not affect, Landlord's right of re-entry or
any other rights of Landlord hereunder or otherwise provided at law or in
equity.

10.      TAXES.

10.1     REAL PROPERTY TAXES. Tenant agrees to pay all general and special real
property taxes, assessments (including, without limitation, change in ownership
taxes or assessments), liens, bond obligations, license fees or taxes,
commercial rent taxes and any similar impositions in-lieu of other impositions
now or previously within the definition of real property taxes or assessments
and any and all assessments under any covenants, conditions and restrictions
affecting the Premises (collectively "REAL PROPERTY TAXES") which may be now or
hereafter levied or assessed against the Premises applicable to the period from
the Commencement Date, until the expiration or sooner termination of this Lease.
Real Property Taxes shall include, by way of illustration but not limitation,
the following: (a) any tax on Landlord's "right" to rent or "right" to other
income from the Premises or as against Landlord's business of leasing the
Premises; (b) any assessment, tax, fee, levy or charge in substitution,
partially or totally, of any assessment, tax, fee, levy or charge previously
included within the definition of real property tax, it


                                      -10-
<PAGE>


being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the
voters of the State of California in the June, 1978 election and that
assessments, taxes, fees, levies and charges may be imposed by governmental
agencies for such services as fire protection, street, sidewalk and road
maintenance, refuse removal and for other governmental services formerly
provided without charge to property owners or occupants. It is the intention of
Tenant and Landlord that all such new and increased assessments, taxes, fees,
levies and charges be included within the definition of "real property taxes"
for the purposes of this Lease; (c) any assessment, tax, fee, levy or charge
allocable to or measured by the area of the Premises or the Rent payable by
Tenant hereunder, including, without limitation, any gross receipts tax or
excise tax levied by state, city or federal government, or any political
subdivision thereof, with respect to the receipt of such Rent, or upon or with
respect to the possession, leasing, operation, management, maintenance,
alteration, repair, use or occupancy by Tenant and of the Premises; (d) any
assessment, tax, fee, levy or charge upon this transaction or any document to
which Tenant is a party, creating or transferring an interest or an estate in
the Premises; and/or (e) any assessment, tax, fee, levy or charge by any
governmental agency related to any transportation plan, fund or system
(including assessment districts) instituted within the geographic area of which
the Premises make a part. Despite the foregoing, under no circumstances shall
Real Property Taxes include Landlord's federal, state or local, income,
franchise, inheritance or estate taxes.

All Real Property Taxes for the tax year in which the Commencement Date occurs
and for the tax year in which this Lease terminates shall be apportioned and
adjusted so that Tenant shall not be responsible for any Real Property Taxes for
a period of time occurring prior to the Commencement Date or subsequent to the
expiration of the Lease term.

Tenant agrees to pay to the taxing authority entitled thereto the total Real
Property Taxes due. On or before the Commencement Date, Landlord shall make
arrangements with the applicable taxing authorities for the delivery of the
statements for such Real Property Taxes directly to Tenant. Any of said payments
to be made directly to the taxing authority shall be made at least fifteen (15)
days prior to the delinquency date established by the taxing authority, and
Tenant shall, within ten (10) business days of written request from Landlord,
deliver evidence of such payment to Landlord. Failure of Tenant to pay said Real
Property Taxes as and when herein specified shall, in addition to all other
rights and remedies of Landlord hereunder, subject Tenant to any fine, penalty,
interest, or cost which Landlord may incur as a result thereof. Tenant shall,
within thirty (30) days after demand, reimburse Landlord for any such fine,
penalty, interest, or cost, together with interest thereon at the Interest Rate.

Notwithstanding the foregoing provisions, if the Premises are not separately
assessed but are included in a larger tax parcel for purposes of the assessment
of Real Property Taxes, then Tenant shall pay to Landlord, within thirty (30)
days following and invoice therefor, Tenant's pro rata share of all Real
Property Taxes that are assessed against such larger tax parcel. Tenant's pro
rata share under such circumstances shall be apportioned according to the
assessed value of the Premises as it relates to the total assessed value of all
of the buildings (including the Premises) situated in the separate tax parcel.

Notwithstanding anything to the contrary contained herein, to the extent that
any of the following items are not of record, as of the date of this Lease, Real
Property Taxes and assessments shall not include: (i) reserves for future Real
Property Taxes; and (ii) any documentary transfer taxes arising from a voluntary
transfer of the Premises or any portion of the Project by Landlord. If a
reduction in Real Property Taxes is obtained for any year of the Term during
which Tenant paid such Real Property Taxes, then Tenant, at Tenant's option,
shall be entitled to such reduction by way of direct reimbursement or a credit
against the next installment(s) of Monthly Rent coming due. If, by applicable
law, any taxes or assessments may be paid in installments at the option of the
taxpayer, then Tenant may pay such taxes and assessments in installments.

10.2     PERSONAL PROPERTY TAXES. Tenant shall be liable for, and shall pay
before delinquency, all taxes and assessments (real and personal) levied against
(a) any personal property or trade fixtures placed by Tenant in or about the
Premises (including any increase in the assessed value of the Premises based
upon the value of any such personal property or trade fixtures); and (b) any
Tenant Improvements or alterations in the Premises (whether installed and/or
paid for by Landlord or Tenant). If any such taxes or assessments are levied
against Landlord or Landlord's property, Landlord may, after at least ten (10)
business days prior written notice to Tenant (and under proper protest if
requested by Tenant) pay such taxes and assessments, and Tenant shall reimburse
Landlord therefor within thirty (30) days after demand by Landlord; provided,
however, Tenant, at its sole cost and expense, shall have the right, with
Landlord's cooperation, to bring suit in any court of competent jurisdiction to
recover the amount of any such taxes and assessments so paid under protest.

10.3     TENANT'S RIGHT TO CONTEST. Tenant may contest the legal validity or
amount of any personal property taxes, assessments or charges, or Real Property
Taxes for which Tenant is responsible under this Lease and may institute such
proceedings as Tenant considers necessary. If Tenant contests any such tax,
assessment or charge, Tenant shall indemnify and hold harmless and protect
Landlord and the Premises from any liens, claims, liability and damages incurred
by Landlord in connection therewith by adequate surety bond or other appropriate
security reasonably acceptable to Landlord.

11.      REPAIRS.

11.1     TENANT'S REPAIR OBLIGATIONS. Except for Landlord's obligations under
Sections 11.2 and 11.3 and the Work Letter, Tenant shall at all times and at
Tenant's sole cost and expense, keep, maintain,


                                      -11-
<PAGE>


clean, repair, renovate, retrofit, replace and preserve the Premises and all
parts thereof, structural and non-structural, including, without limitation,
utility meters, plumbing, pipes and conduits, all heating, ventilating and air
conditioning systems located within the Premises, all fixtures, furniture and
equipment, Tenant's signs, if any, locks, closing devices, security devices,
windows, window sashes, casements and frames, floors and floor coverings,
shelving, restrooms, ceilings, interior walls, roof (including the roof membrane
but excluding the structural portions thereof), skylights, interior and demising
walls, doors, electrical and lighting equipment, sprinkler systems, parking
areas, driveways, walkways, parking lots, loading dock areas and doors, rail
spur areas, fences, signs, lawns and landscaping, if any, all Improvements and
any Tenant Improvements, Tenant Changes or other alterations, additions and
other property and/or fixtures located within the Premises in good condition and
repair, reasonable wear and tear excepted. Tenant's repair and maintenance
obligations shall include, but not be limited to, slurry coating the parking
areas at such intervals during the initial Term and the Option Period (if
applicable) as reasonably determined by Tenant but in no event less frequently
than every forty-five (45) months; parking area and driveways sweeping and
repairing a condition consistent with comparable first-class buildings in the
Kearny Mesa area, reasonable wear and tear excepted. Tenant's repair and
maintenance obligations shall include, but not be limited to, responsibility for
painting the exterior of the Buildings whenever necessary to maintain the first-
class appearance of the Buildings. Except as provided in Section 11.2, 11.3 and
the Work Letter, Tenant shall at all times during the Term make all structural
and non-structural changes, repairs and improvements to the Premises of every
kind and nature, whether ordinary or extraordinary, foreseen or unforeseen,
which may be required by any Laws or for the safety of the Premises. Tenant
agrees to procure and maintain landscaping contracts and maintenance contracts
(which contracts shall be subject to Landlord's reasonable approval) for all
heating, ventilating and air conditioning systems with reputable
providers/contractors reasonably approved by Landlord. Such maintenance and
repairs shall be performed with due diligence, lien-free and in a good and
workmanlike manner, by licensed contractor(s) which are selected by Tenant and
approved by Landlord, which approval Landlord shall not unreasonably withhold or
delay.

11.2     LANDLORD'S REPAIR RIGHTS AND OBLIGATIONS. Except as provided in this
Section 11.2 and Section 11.3 and the Work Letter, Landlord has no obligation
whatsoever to alter, remodel, improve, repair, renovate, retrofit, replace,
redecorate or paint all or any part of the Premises. Except as specifically
provided herein, Tenant waives the right to make repairs at Landlord's expense
under any law, statute or ordinance now or hereafter in effect (including the
provisions of California Civil Code Section 1942 and any successive sections or
statutes of a similar nature). If Tenant fails to perform Tenant's obligations
under Section 11.1 hereof, or under any other provision of this Lease, then
Landlord shall have the option (but not the obligation) to enter upon the
Premises after ten (10) days' prior written notice to Tenant, or in the case of
an emergency immediately without prior notice, to perform such obligations on
Tenant's behalf necessary to return the Premises to good order, condition and
repair, whereupon the actual and documented out-of-pocket costs incurred by
Landlord shall become due and payable to Landlord, within ten (10) business days
of written demand which shall be accompanied by reasonable supporting
documentation. Promptly following written notice thereof from Tenant, Landlord
shall, at its cost, repair and maintain the structural parts of the Building,
including the exterior walls, foundations and structural portions of the roof
(excluding the roof membrane); provided, however, to the extent such maintenance
or repairs are required as a result of any act, neglect, fault or omission of
Tenant or any of Tenant's Parties or otherwise made necessary due to Tenant's
use or occupancy of the Premises, Tenant shall pay to Landlord within ten (10)
business days of written demand, as additional rent, the actual and documented
out-of-pocket costs of such maintenance and repairs. Promptly following written
notice thereof from Tenant, Landlord shall perform, at its cost and expense, all
improvements to the Buildings to the extent and only to the extent such
improvements are necessary due to the failure of the Buildings, at Substantial
Completion, to comply with the requirements of all building codes and laws
(including the ADA) applicable as of Substantial Completion and in no way
arising from or in connection with any act, omission or construction carried out
by or for Tenant at the Premises. No later than thirty (30) days following the
Commencement Date, Landlord shall provide Tenant with a complete list of all
major contractors and subcontractors and a complete list of the manufacturers
and suppliers of all major components of the Buildings and the major building
systems (such as the roof, elevators, HVAC and electrical systems) and Landlord
shall assign to Tenant all warranties received from, and all rights of
enforcement of such warranties against, all contractors and subcontractors,
manufacturers and suppliers involved in the construction of the Premises, except
for those warranties and rights pertaining to those components of the Premises
for which Landlord is responsible pursuant to this Section 11.2. Despite any
such assignment, in the event any contractor, subcontractor, manufacturer or
supplier fails or refuses to honor any such warranty or fails to recognize
Tenant's rights to enforce any such warranty, Landlord agrees, at Tenant's sole
cost and expense, to reasonably cooperate with Tenant to enforce such warranty.

11.3     CONDITION OF PREMISES; WARRANTY. Landlord shall cause the Premises and
the Project to be constructed in a first-class, lien free, manner accordance
with all applicable laws, regulations and building codes in effect as of the
Commencement Date and then being enforced against Landlord including, without
limitation, any requirements of the ADA. If Tenant notifies Landlord within one
(1) year after the Commencement Date that the Premises are in violation of any
such law which was in effect and enforced against Landlord as of the
Commencement Date, or that the Premises or the Common Areas or any portion
thereof is defective, Landlord, at Landlord's sole cost and expense, shall
promptly make those modifications necessary to bring such item into compliance
with such laws, regulations or building codes or to cure such defect, as
applicable; provided, however, that after such one (1) year period, Tenant
shall, at Tenant's sole cost and expense, be solely responsible for the
correction of any such violation or defect (subject, however, to Landlord's
repair obligations hereunder); provided further, however, that throughout the
Term of this Lease and the Option Period (if applicable), Landlord shall be
responsible for the repair


                                      -12-
<PAGE>


of any defects in design or construction of the foundation, slab structure,
exterior wall structure and roof structure (excluding the roof membrane) of the
Buildings. Furthermore, for a period of twelve (12) months following Substantial
Completion, Landlord warrants as free from all defects in design, materials and
workmanship the heating, ventilation and air-conditioning systems installed by
Landlord in the Premises and the electrical (but excluding, in any event, the
Tenant Special Items (as defined in Section 9(e) of Exhibit "C")) and plumbing
systems installed by Landlord and serving the Premises (collectively, the
"WARRANTED ITEMS"), and Landlord shall (as Tenant's sole and exclusive remedy
for a breach of such warranty) repair or replace, at Landlord's cost, any such
defect in the Warranted Items provided that Tenant gives Landlord written notice
of such defect prior to the expiration of such twelve (12) month period. Tenant
acknowledges and agrees that, except to the extent specifically set forth in
this Lease, Landlord has not made, does not make and specifically negates and
disclaims any representations, warranties, promises, covenants, agreements or
guarantees of any kind or character whatsoever concerning or with respect to (a)
the value, nature, quality or condition of the Premises; (b) the suitability of
the Premises for any and all activities and uses which Tenant may conduct
thereon; (c) the compliance of the Premises with any laws, rules, ordinances or
regulations of any applicable governmental authority or body, including, without
limitation, environmental laws (collectively, "LAWS"); (d) the habitability,
merchantability, marketability, profitability or fitness for a particular
purpose of the Premises; (e) the manner or quality of the construction or
materials incorporated into the Premises; (f) the manner, quality, state of
repair or lack of repair of the Premises; or (g) any other matter with respect
to the Premises. Tenant further acknowledges and agrees that, except to the
extent specifically set forth in this Lease, the leasing of the Premises as
provided for herein is made on an "AS-IS" condition and basis with all faults.
Except for Landlord's obligations under Section 11.2, Section 11.3 and the Work
Letter, Landlord shall have no liability or responsibility for any latent or
patent defects in the Premises. Except for damages arising from Landlord's
failure to perform its obligations under Section 11.2 or this Section 11.3 and
the Work Letter, Tenant and anyone claiming by, through or under Tenant hereby
fully and irrevocably releases Landlord from any and all claims that it may now
have or hereafter acquire against Landlord (but not against any design
professional or Landlord's contractors, subcontractors, manufacturers or
suppliers) for any cost, loss, liability, damage, expense, demand, action or
cause of action arising from or related to any construction defects, errors,
omissions or other conditions, including, but not limited to, environmental
matters, now or hereafter affecting the Premises. This release includes claims
of which Tenant is presently unaware or which Tenant does not presently suspect
to exist in its favor which, if known by Tenant, would materially affect
Tenant's release of Landlord. Tenant specifically waives the provision of
California Civil Code Section 1542, which provides as follows: "A general
release does not extend to claims which the creditor does not know or suspect to
exist in his favor at the time of executing the release, which if known by him
must have materially affected his settlement with the debtor."

11.4     LANDLORD'S CONTRIBUTION FOR CERTAIN EXPENDITURES. Notwithstanding
anything above to the contrary, if any replacement obligation of Tenant under
Section 11.3 with respect to the Warranted Items would normally be capitalized
under normal accounting practice and is in excess of Twenty-Five Thousand
Dollars ($25,000.00), and if as a result of such expenditure the useful life of
the Warranted Items (as such useful life is based on the estimated actual life
pursuant to generally accepted accounting practices) will extend beyond the
Term, then, subject to the requirements set forth in this Section 11.4, Landlord
will reimburse Tenant for Landlord's prorata share thereof within thirty (30)
days following the expiration or sooner termination of this Lease; provided,
however, Landlord will have no such reimbursement obligation if this Lease
terminates as a result of an Event of Default. Landlord's prorata share of such
expenditure shall be a fraction, the numerator of which is the number of months
remaining on the useful life of the Warranted Item after the expiration or
sooner termination of this Lease, and the denominator of which is the total
number of months of the useful life of the Warranted Item. As a condition
precedent to Landlord's obligation to reimburse Tenant for a prorata share of
any such expenditure, Tenant shall first obtain Landlord's prior written
approval of the contractor, the plans and specifications, the amount of any such
expenditure and the useful life resulting from such expenditure, which approval
shall not be unreasonably withheld or delayed. Upon such approval, either party
shall, at the other party's request, enter into an amendment of this Lease
identifying the amount subject to reimbursement by Landlord.

11.5     TENANT'S RIGHT TO MAKE REPAIRS. If Tenant provides written notice to
Landlord of an event or circumstance which requires the action of Landlord with
respect to the Landlord's repair rights and obligations as described in Section
11.2 above, and Landlord fails to provide or commence to provide (and thereafter
diligently proceeds with such efforts to completion), such action as required by
the terms of this Lease within ten (10) days after receipt of such written
notice (or such longer period of time as is reasonable under the circumstances
or such shorter period of time as may be applicable in the event of an
emergency), Tenant may proceed to take the required action upon delivery of an
additional five (5) business days notice to Landlord (or within the applicable
and appropriate time period based on an emergency) specifying that Tenant is
taking such required action, and if such action was required under the terms of
this Lease to be taken by Landlord, then Tenant shall be entitled to prompt
reimbursement by Landlord of Tenant's costs and expenses in taking such action
plus interest at the Interest Rate during the period from the date Tenant incurs
such costs and expenses until such time as payment is made by Landlord. Tenant
may utilize the services of any qualified contractor which normally and
regularly performs similar work in other comparable buildings and building
projects located in the Kearny Mesa area of San Diego, of similar age and
quality of construction (hereinafter "COMPARABLE BUILDINGS"). Further, if
Landlord does not deliver a detailed written objection to Tenant, within thirty
(30) days after receipt of an invoice by Tenant of its costs of taking action
which Tenant claims should have been taken by Landlord, and if such invoice from
Tenant sets forth a reasonably particularized breakdown of its costs and
expenses in connection with taking such action on behalf of Landlord, then
Tenant shall be entitled to deduct from the Monthly Rent payable by Tenant under
this Lease, the amount set forth in such invoice


                                      -13-
<PAGE>


together with interest at the Interest Rate; provided, however, that in no event
shall Tenant be entitled to offset more than twenty percent (20%) of the Monthly
Rent in any one (1) month during the Term of this Lease under this Section 11.5.
If, however, Landlord in good faith delivers to Tenant, within thirty (30) days
after receipt of Tenant's invoice, a written objection to the payment of such
invoice, setting forth with reasonable particularity Landlord's reasons for its
claim that such action did not have to be taken by Landlord pursuant to the
terms of this Lease of that the charges are excessive (in which case Landlord
shall pay the amount it contends would not have been excessive), then Tenant
shall not be entitled to such deduction from Monthly Rent, but Tenant may
commence arbitration proceedings against Landlord (under local Judicial
Arbitration and Mediation Services ("JAMS") to collect the amount set forth in
the subject invoice. Tenant shall comply with the other terms and conditions of
this Lease if Tenant takes the required action, except that Tenant is not
required to obtain Landlord's consent for such repairs.

12.      ALTERATIONS.

12.1     TENANT CHANGES; CONDITIONS.

(a)      Tenant shall not make any alterations, additions, improvements or
         decorations to the Premises (collectively, "TENANT CHANGES," and
         individually, a "TENANT CHANGE") unless Tenant first obtains Landlord's
         prior written approval thereof, which approval Landlord shall not
         unreasonably withhold or delay. Notwithstanding the foregoing,
         Landlord's prior approval shall not be required for any Tenant Change
         which satisfies all of the following conditions (hereinafter a
         "PRE-APPROVED CHANGE"): (i) the costs of such Tenant Change does not
         exceed Fifty Thousand Dollars ($50,000.00) individually; (ii) Tenant
         delivers to Landlord final plans, specifications and working drawings
         for such Tenant Change at least ten (10) days prior to commencement of
         the work thereof (if working drawings are prepared in connection with
         the Tenant Change); (iii) Tenant and such Tenant Change otherwise
         satisfy all other conditions set forth in this Section 12.1; and (iv)
         the Tenant Change does not affect the structural, electrical,
         mechanical, life-safety or exterior elements of the Premises. Despite
         anything in this Article 12 to the contrary, the construction of the
         Buildings and the initial Tenant Improvements shall be governed by the
         Work Letter.

(b)      After Landlord has approved the Tenant Changes and the plans,
         specifications and working drawings therefor (or is deemed to have
         approved the Pre-Approved Changes as set forth in Section 12.1(a)
         above), Tenant shall: (i) enter into an agreement for the performance
         of such Tenant Changes with licensed and bondable contractors and
         subcontractors selected by Tenant and approved by Landlord, which
         approval shall not be unreasonably withheld; and (ii) before proceeding
         with any Tenant Change, provide Landlord with at least five (5) days'
         prior written notice thereof. In addition, before proceeding with any
         Tenant Change, Tenant's contractors shall obtain, on behalf of Tenant
         and at Tenant's sole cost and expense all necessary governmental
         permits and approvals for the commencement and completion of such
         Tenant Change. Landlord's approval of any contractor(s) and
         subcontractor(s) of Tenant shall not release Tenant or any such
         contractor(s) and/or subcontractor(s) from any liability for any
         conduct or acts of such contractor(s) and/or subcontractor(s). Further,
         Landlord's approval of Tenant Changes and the plans therefor will
         create no liability or responsibility on Landlord's part concerning the
         completeness of same or their design sufficiency or compliance with
         laws.

(c)      All Tenant Changes shall be performed: (i) in accordance with the
         approved plans, specifications and working drawings; (ii) lien-free and
         in a good and workmanlike manner; (iii) in compliance with all laws,
         rules and regulations of all governmental agencies and authorities
         including, without limitation, applicable building permit requirements
         and the provisions of Title III of the ADA; (iv) by licensed and/or
         bondable contractors and subcontractors approved by Landlord and (v) at
         such times, in such manner and subject to such non-discriminatory rules
         and regulations as Landlord may from time to time reasonably designate.

(d)      Throughout the performance of the Tenant Changes, Tenant shall obtain,
         or cause its contractors to obtain, workers compensation insurance in
         compliance with the provisions of Section 20 of this Lease and
         "Builders All Risk" insurance in a commercially reasonable amount given
         the scope of the Tenant Change, covering the construction of such
         Tenant Change, it being understood by Tenant, that all such Tenant
         Changes shall be insured by Tenant pursuant to Section 20 upon the
         completion thereof.

(e)      Landlord agrees that Landlord shall approve or disapprove for
         reasonable reasons, the plans and specifications and/or working
         drawings for any proposed Tenant Change within seven (7) business days
         after receipt of the same by Landlord and, if disapproved, Landlord
         shall return the plans and specifications and/or working drawings to
         Tenant together with a reasonably detailed statement of the basis for
         Landlord's disapproval thereof and Tenant shall direct Tenant's
         architect or space planner to make all necessary revisions to the same.
         If Landlord thereafter disapproves the plans and specifications and/or
         working drawings for the proposed Tenant Change as revised, Landlord,
         Tenant and Tenant's architect or space planner shall, within three (3)
         business days following receipt of notice of such disapproval, meet and
         revise the plans and specifications and/or working drawings to the
         reasonable satisfaction of Landlord and Tenant. This procedure shall be
         repeated until Landlord and Tenant ultimately approve the plans and
         specifications and/or working drawings for the proposed Tenant Change.
         Despite the foregoing, if Landlord fails to respond to any request by
         Tenant for approval of a Tenant Change within ten


                                      -14-
<PAGE>


         (10) business days of receipt of Tenant's request for such approval,
         Landlord's failure to respond within three (3) business days after
         receipt of a second notice after the expiration of the initial ten (10)
         business day period (which second notice shall reference this Section
         12.1 and shall state that Landlord's failure to respond shall be deemed
         Landlord's approval of the Tenant Change identified in such second
         notice), shall be deemed to be Landlord's approval with respect to the
         same.

12.2     REMOVAL OF TENANT CHANGES AND TENANT IMPROVEMENTS. All Tenant Changes
and the initial Tenant Improvements in the Premises (whether installed or paid
for by Landlord or Tenant), shall become the property of Landlord and shall
remain upon and be surrendered with the Premises at the end of the Term of this
Lease; provided, however, Landlord may, by written notice delivered to Tenant on
or before the expiration of the Lease Term (or upon any sooner termination of
this Lease) identify those Tenant Changes which Landlord shall require Tenant to
remove at the end of the Term of this Lease. If Landlord requires Tenant to
remove any such items as described above, Tenant shall, at its sole cost, remove
the identified items on or before the expiration or sooner termination of this
Lease and repair any damage to the Premises caused by such removal (or, at
Landlord's option, and provided Landlord has given Tenant at least ten (10)
business days written notice prior to taking any action, shall pay to Landlord
all of Landlord's actual and document costs of such removal and repair). Despite
anything in this Lease to the contrary, under no circumstances will Tenant be
required to remove any of the initial Tenant Improvements to the Premises.

12.3     REMOVAL OF PERSONAL PROPERTY. All articles of personal property owned
by Tenant or installed by Tenant at its expense in the Premises (including
business and trade fixtures, furniture and movable partitions, phone systems and
security systems) shall be, and remain, the property of Tenant, and shall be
removed by Tenant from the Premises, at Tenant's sole cost and expense, on or
before the expiration or sooner termination of this Lease. Tenant shall repair
any damage caused by such removal.

12.4     TENANT'S FAILURE TO REMOVE. If Tenant fails to remove by the expiration
or sooner termination of this Lease all of its personal property, or any items
of Tenant Changes identified by Landlord for removal pursuant to Section 12.2
above, then Landlord may, following an additional five (5) business days' prior
written notice to Tenant (without liability to Tenant for loss thereof), at
Tenant's sole cost and in addition to Landlord's other rights and remedies under
this Lease, at law or in equity: (a) remove and store such items in accordance
with applicable law; and/or (b) upon ten (10) days' prior notice to Tenant sell
all or any such items at private or public sale for such price as Landlord may
obtain as permitted under applicable law. Landlord shall apply the proceeds of
any such sale to any amounts due to Landlord under this Lease from Tenant
(including Landlord's attorneys' fees and other costs incurred in the removal,
storage and/or sale of such items), with any remainder to be paid to Tenant.

13.      LIENS. Tenant shall not permit any mechanic's, materialmen's or other
liens to be filed against all or any part of the Premises, nor against Tenant's
leasehold interest in the Premises, by reason of or in connection with any
repairs, alterations, improvements or other work contracted for or undertaken by
Tenant or any other act or omission of Tenant or Tenant's agents, employees,
contractors, licensees or invitees. Tenant shall, at Landlord's request, provide
Landlord with enforceable, conditional and final lien releases (and other
reasonable evidence reasonably requested by Landlord to demonstrate protection
from liens) from all persons furnishing labor and/or materials with respect to
the Premises. Landlord shall have the right at all reasonable times to post on
the Premises and record any notices of non-responsibility which it deems
necessary for protection from such liens. If any such liens are filed, Tenant
shall, at its sole cost, promptly cause such lien to be released of record or
bonded so that it no longer affects title to the Premises. If Tenant fails to
cause such lien to be so released or bonded within twenty (20) days after filing
thereof, Landlord may, following an additional ten (10) days prior written
notice to Tenant, without waiving its rights and remedies based on such breach,
and without releasing Tenant from any of its obligations, cause such lien to be
released by the posting of an appropriate bond to cause the lien to be released.
Tenant shall pay to Landlord within thirty (30) days after receipt of invoice
from Landlord, any sum paid by Landlord to obtain the bond required to remove
such liens, together with interest at the Interest Rate from the date of such
payment by Landlord. Notice is hereby given that Landlord shall not be liable
for any labor, services or materials furnished or to be furnished to Tenant, or
to anyone holding the Premises through or under Tenant, and that no mechanics'
or other liens for any such labor, services or materials shall attach to or
affect the interest of Landlord in the Premises.

14.      ASSIGNMENT AND SUBLETTING.

14.1     RESTRICTION ON TRANSFER. Tenant will not assign this Lease in whole or
in part, nor sublet all or any part of the Premises (collectively and
individually, a "TRANSFER"), without the prior written consent of Landlord,
which consent Landlord will not unreasonably withhold, condition or delay. In no
event may Tenant encumber or hypothecate this Lease. The consent by Landlord to
any assignment, encumbrance or subletting shall not constitute a waiver of the
necessity for such consent to any subsequent assignment or subletting. This
prohibition against assigning or subletting shall be construed to include a
prohibition against any assignment or subletting by operation of law.
Irrespective of any assignment or sublease, Tenant shall remain fully liable
under this Lease and shall not be released from performing any of the terms,
covenants and conditions of this Lease. Without limiting in any way Landlord's
right to withhold its consent on any reasonable grounds, it is agreed that
Landlord will not be acting unreasonably in refusing to consent to an assignment
or sublease if, in Landlord's reasonable opinion, (i) the proposed assignee or
sublessee does not have the financial capability to fulfill the obligations
imposed by the assignment or sublease, or (ii) the proposed assignment or
sublease involves a change in the Permitted Use of the


                                      -15-
<PAGE>


Premises. If Tenant is a corporation (other than a publicly held company whose
stock is traded on a nationally recognized exchange), or is an unincorporated
association or partnership, the transfer, assignment or hypothecation of any
stock or interest in such corporation, association or partnership in the
aggregate in excess of forty-nine percent (49%) shall be deemed an assignment
within the meaning and provisions of this Section 14.1. Landlord specifically
acknowledges and agrees that Landlord shall not have the right to recapture any
portion of the Premises which is the subject of a proposed Transfer by Tenant.

14.2     TRANSFER NOTICE. If Tenant desires to effect a Transfer for which
Landlord's consent is required, then at least thirty (30) days prior to the date
when Tenant desires the Transfer to be effective (the "TRANSFER Date"), Tenant
agrees to give Landlord a notice (the "TRANSFER NOTICE"), stating the name,
address and business of the proposed assignee, sublessee or other transferee
(sometimes referred to hereinafter as "TRANSFEREE"), reasonable information
concerning the ownership, and financial condition of the proposed Transferee,
the Transfer Date, any ownership or commercial relationship between Tenant and
the proposed Transferee, and the consideration and all other material terms and
conditions of the proposed Transfer, all in such detail as Landlord may
reasonably require.

14.3     LANDLORD'S OPTIONS. Within ten (10) days of Landlord's receipt of any
Transfer Notice, and any additional information requested by Landlord concerning
the proposed Transferee's financial responsibility, Landlord will notify Tenant
of its election to do one of the following: (i) consent to the proposed Transfer
subject to such reasonable conditions as Landlord may impose in providing such
consent; or (ii) refuse such consent, which refusal shall be on reasonable
grounds which shall be set forth in a detailed written statement to Tenant.

14.4     ADDITIONAL CONDITIONS. A condition to Landlord's consent to any
Transfer of this Lease will be the delivery to Landlord of a true copy of the
fully executed instrument of assignment, sublease, transfer or hypothecation.
Tenant agrees to pay to Landlord, as additional rent, on a monthly basis, fifty
percent (50%) of all sums and other consideration payable to and for the benefit
of Tenant by the assignee or sublessee (other than an assignee or sublessee who
is a Permitted Transferee) in excess of the Rent payable under this Lease for
the same period and portion of the Premises. In calculating excess rent or other
consideration which may be payable to Landlord under this Section 14.4, Tenant
will be entitled to deduct commercially reasonable third party brokerage
commissions and attorneys' fees (including those attorneys' fees and costs
required to be reimbursed to Landlord as provided below) and other amounts
reasonably and actually expended by Tenant in connection with such assignment or
subletting, including, without limitation, (i) the costs of any changes,
alterations and improvements to the Premises in connection with the Transfer,
(ii) any space planning, architectural or design fees or expenses incurred in
marketing such space or in connection with such Transfer, (iii) any improvement
allowance or other monetary concessions provided to the Transferee, (iv) any
lease takeover costs incurred by Tenant in connection with the Transfer, and (v)
brokerage commissions and out-of-pocket costs of advertising the space which is
the subject of the Transfer, if written evidence of such expenditures is
provided to Landlord. For purposes of calculating any such excess rent, Tenant's
transfer costs (as described above) shall be credited against the first amounts
received by Tenant as a result of such Transfer. No Transfer will release Tenant
of Tenant's obligations under this Lease or alter the primary liability of
Tenant to pay the Rent and to perform all other obligations to be performed by
Tenant hereunder. Landlord may require that any Transferee remit directly to
Landlord on a monthly basis, all monies due Tenant by said Transferee, and each
sublease shall provide that if Landlord gives said sublessee written notice that
Tenant is in default under this Lease beyond any applicable notice and cure
period, said sublessee will thereafter make all payments due under the sublease
directly to or as directed by Landlord, which payments will be credited against
any payments due under this Lease. Tenant hereby irrevocably and unconditionally
assigns to Landlord all rents and other sums payable under any sublease of the
Premises; provided, however, that Landlord hereby grants Tenant a license to
collect all such rents and other sums so long as Tenant is not in default under
this Lease. Tenant shall, within ten (10) days after the execution and delivery
of any assignment or sublease, deliver a copy thereof to Landlord. Consent by
Landlord to one Transfer will not be deemed consent to any subsequent Transfer.
In the event of default by any Transferee of Tenant or any successor of Tenant
in the performance of any of the terms hereof, Landlord may proceed directly
against Tenant without the necessity of exhausting remedies against such
Transferee or successor. If Tenant effects a Transfer or requests the consent of
Landlord to any Transfer (whether or not such Transfer is consummated), then,
within thirty (30) days of Tenant's receipt of written demand from Landlord,
Tenant agrees to pay Landlord a non-refundable administrative fee of Five
Hundred Dollars ($500.00), plus Landlord's reasonable attorneys' fees and costs
(whether attributable to Landlord's in-house attorneys or paralegals or
otherwise) and other costs incurred by Landlord in reviewing such proposed
assignment or sublease, which fees and costs shall in no event exceed One
Thousand Dollars ($1,000.00). Notwithstanding any contrary provision of this
Lease, if Tenant or any proposed Transferee claims that Landlord has
unreasonably withheld or delayed its consent to a proposed Transfer or otherwise
has breached its obligations under this Section 14, Tenant's and such
Transferee's only remedy shall, unless it is determined by a court of competent
jurisdiction that Landlord withheld its consent in bad faith, be to seek
monetary damages, a declaratory judgment and/or injunctive relief, and Tenant,
on behalf of itself and, to the extent permitted by law, such proposed
Transferee waives, in any event, all other remedies against Landlord, including
without limitation, the right to terminate this Lease.

14.5     PERMITTED TRANSFERS. Notwithstanding the provisions of this Section 14
to the contrary, Tenant may assign this Lease or sublet the Premises or any
portion thereof (herein, a "PERMITTED TRANSFER"), without Landlord's consent, to
any holding company, corporation, association or entity which is or


                                      -16-
<PAGE>


becomes a parent, subsidiary or affiliate of Tenant or any entity that controls,
is controlled by or is under common control with Tenant, or to any entity
resulting from a merger , consolidation or reorganization of Tenant, or to any
person or entity that acquires all (or substantially all) of the stock or assets
of Tenant's business as a going concern (a "PERMITTED TRANSFEREE"), provided
that: (a) at least twenty (20) days prior to such assignment or sublease, Tenant
delivers to Landlord the financial statements and other financial and background
information of the assignee or sublessee as described in Section 14.2 above; (b)
in the case of an assignment, the assignee assumes, in full, the obligations of
Tenant under this Lease pursuant to a commercially reasonable assumption
agreement, a fully executed copy of which is delivered to Landlord within twenty
(20) days following the effective date of such assignment or subletting; (c)
such Permitted Transferee has the financial capability to fulfill the
obligations imposed by the assignment or sublease; (d) Tenant remains fully
liable under this Lease; (e) the use of the Premises is permitted under this
Lease; and (f) such transaction is not entered into as a subterfuge to avoid the
restrictions and provisions of this Section 14. Landlord specifically
acknowledges and agrees that as of the date of this Lease, Tenant is a publicly
held company whose stock is traded on a nationally recognized exchange and that
under no circumstances shall any transfer of such stock over such exchange be
deemed a Transfer for purposes of this Lease.

15.      ENTRY BY LANDLORD. Landlord and its employees and agents shall at all
reasonable times and with reasonable advance written notice (which shall be at
least 24 hours, except in the case of an "emergency", which for purposes of this
Lease means situations in which there is an imminent threat to persons and/or
property within the Buildings) to Tenant's designated representative who shall
initially be Garry Smith, have the right to enter the Premises to inspect the
same, to exhibit the Premises to prospective lenders or purchasers (or during
the last nine (9) months of the Term, to prospective tenants), to post notices
of non-responsibility, to alter, improve or repair the Premises as contemplated
by this Lease and/or to otherwise exercise its rights and remedies under this
Lease, all without being deemed guilty of or liable for any breach of Landlord's
covenant of quiet enjoyment or any eviction of Tenant, and without abatement of
rent. In exercising such entry rights, Landlord shall endeavor to minimize, as
reasonably practicable, the interference with Tenant's business, and shall
provide Tenant with reasonable advance written notice of such entry (except in
emergency situations and for providing regularly scheduled services, if any).
Landlord shall have the means which Landlord may deem proper to open Tenant's
doors in an emergency in order to obtain entry to the Premises. Any entry to the
Premises obtained by Landlord by any of said means in an emergency or otherwise
shall not under any circumstances be construed or deemed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant
from the Premises or any portion thereof, or grounds for any abatement or
reduction of Rent and Landlord shall not have any liability to Tenant for any
damages or losses on account of any such entry by Landlord except, subject to
the provisions of Sections 21.1 and 23, to the extent of Landlord's gross
negligence or willful misconduct. In the event Landlord is required to enter the
Premises in an emergency situation, Landlord shall provide Tenant with notice of
such entry as soon as reasonably practicable thereafter.

16.      UTILITIES AND SERVICES. Except for Landlord's obligations set forth in
the Work Letter, Tenant shall be solely responsible for obtaining and shall
promptly pay all charges for heat, air conditioning, water, gas, electricity or
any other utility used, consumed or provided in, furnished to or attributable to
the Premises directly to the supplying utility companies following the Early
Occupancy Date, together with all deposits and hook-up and connection charges
for such utilities. In no event shall Rent abate or shall Landlord be liable for
any interruption or failure in the supply of any such utility services to
Tenant. Landlord will be solely responsible for the payment of all water
capacity charges, meter setting fees, tap in fees and all other similar charges
which may be imposed by the any governmental authority or utility provider in
connection with the initial provision of such utilities to the Premises.

17.      INDEMNIFICATION AND EXCULPATION.

17.1     TENANT'S ASSUMPTION OF RISK AND WAIVER. Except to the extent such
matter is not covered by the insurance required to be maintained by Tenant under
this Lease and such matter is attributable to the gross negligence or willful
misconduct of Landlord or Landlord's agent(s), Landlord shall not be liable to
Tenant, Tenant's employees, agents or invitees for: (i) any damage to property
of Tenant, or of others, located in, on or about the Premises, (ii) the loss of
or damage to any property of Tenant or of others by theft or otherwise, (iii)
any injury or damage to persons or property resulting from fire, explosion,
falling plaster, steam, gas, electricity, water, rain or leaks from any part of
the Premises or from the pipes, appliance of plumbing works or from the roof,
street or subsurface or from any other places or by dampness or by any other
cause of whatsoever nature, or (iv) any such damage caused by other persons in
the Premises, occupants of adjacent property, or the public, or caused by
operations in construction of any private, public or quasi-public work. All
property of Tenant kept or stored on the Premises shall be so kept or stored at
the sole risk of Tenant and Tenant shall hold Landlord harmless from any claims
arising out of damage to the same, including subrogation claims by Tenant's
insurance carriers, unless such damage shall be caused by the negligence or
willful misconduct of Landlord or Landlord's agent(s) (in which case Landlord's
liability (if any) shall be limited to the extent such matter is not covered by
insurance maintained by Tenant or required to be maintained by Tenant
hereunder). Landlord or its agents shall not be liable for interference with the
light or other intangible rights. Nothing contained in this Section 17.1
however, shall operate to relieve Landlord of the consequences of its own
negligence, willful misconduct or criminal acts, or the willful misconduct or
criminal acts of its authorized agents, employees or contractors; subject
however, to the express limitations and restrictions on Landlord's liability
contained elsewhere in this Lease and provided that Landlord's liability, if
any, shall be limited to the extent such


                                      -17-
<PAGE>


consequences are not covered by insurance maintained by Tenant or required to be
maintained by Tenant hereunder.

17.2     INDEMNIFICATION BY TENANT. Tenant shall be liable for, and shall
indemnify, defend, protect and hold Landlord and Landlord's partners, officers,
directors, employees, agents, successors and assigns (collectively, "Landlord
Indemnified Parties") harmless from and against, any and all claims, damages,
judgments, suits, causes of action, losses, liabilities and expenses, including
attorneys' fees and court costs (collectively, "INDEMNIFIED CLAIMS"), arising or
resulting from (a) any occurrence at the Premises following the Early Occupancy
Date, unless caused by the gross negligence or willful misconduct of Landlord or
its agents, employees or contractors, (b) any act or omission of Tenant or any
of Tenant's Parties; (c) the use of the Premises and conduct of Tenant's
business by Tenant or any Tenant Parties, or any other activity, work or thing
done, permitted or suffered by Tenant or any Tenant Parties, in or about the
Premises; and/or (d) any third party claim arising out of the default by Tenant
of any obligations on Tenant's part to be performed under the terms of this
Lease. In case any action or proceeding is brought against Landlord or any
Landlord Indemnified Parties by reason of any such Indemnified Claims, Tenant,
upon notice from Landlord, shall defend the same at Tenant's expense by counsel
approved in writing by Landlord, which approval shall not be unreasonably
withheld.

17.3     LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall indemnify, defend,
protect, and hold harmless Tenant and the Tenant Parties from any Indemnified
Claims incurred in connection with or arising from (a) any cause in or about the
Project (including the parking areas), during the Term (to the extent covered by
Landlord's insurance policies carried pursuant to the terms of this Lease), or
(b) any negligent acts or omissions or willful misconduct of any of the Landlord
Parties in, on, or about the Buildings (except and to the extent the same is
covered by insurance required to be carried by Tenant pursuant to this Lease) or
the Project, either prior to, during, or after the expiration of the Term,
provided that, except as set forth above, the terms of the foregoing indemnity
shall not apply to the extent such Claims arise from the negligence or willful
misconduct of the Tenant Parties in connection with the Tenant Parties'
activities in, on, or about the Buildings or the Project.

17.4     WAIVER OF CONSEQUENTIAL DAMAGES. Notwithstanding any contrary provision
of this Lease, neither Landlord nor Tenant shall be liable to the other party
for any consequential damages for a breach or default under this Lease, provided
that this sentence shall not be applicable to any consequential damages which
may be incurred by the Landlord Parties relating to or in connection with any
holdover by Tenant following the expiration of the Term, subject to and in
accordance with the provisions of Section 9 of this Lease.

17.5     SURVIVAL; NO RELEASE OF INSURERS. The indemnification obligations under
Sections 17.2 and 17.3, shall survive the expiration or earlier termination of
this Lease. The covenants, agreements and indemnification in this Section 17
above, are not intended to and shall not relieve any insurance carrier of its
obligations under policies required to be carried pursuant to the provisions of
this Lease.

18.      DAMAGE OR DESTRUCTION.

18.1     OBLIGATION TO RESTORE. Except as specifically provided in Section 18.2
below, in case of damage to or destruction of the Premises, whether or not by a
risk required to be covered by insurance as set forth in Section 20 of this
Lease, this Lease shall not terminate and Tenant shall promptly restore,
rebuild, replace or repair (hereinafter referred to as "RESTORE" or
"RESTORATION") the Premises to substantially the same condition as existed
immediately prior to such damage or destruction, subject, in any event, to
Tenant's receipt of all applicable insurance proceeds (to the extent Landlord
has exercised the Insurance Option) pertaining to the insurance maintained by
Landlord hereunder or required to be maintained by Landlord hereunder (if
Landlord exercised the Insurance Option). Such Restoration shall be commenced
promptly but in no event later than the later of (i) ninety (90) days after the
casualty in the event of an uninsured casualty; or (ii) thirty (30) days
following Tenant's receipt of applicable insurance proceeds if the casualty is
one which is required to be covered by insurance carried by Tenant or Landlord
pursuant to this Lease and shall be prosecuted with due diligence, subject to
Tenant's receipt of all governmental approvals required to proceed with the
restoration (which Tenant shall use diligent efforts to obtain) and subject to
Force Majeure.

18.2     TENANT'S TERMINATION OPTION. Notwithstanding the foregoing, however, in
the case of damage to or destruction of the Premises that Tenant's architect
and/or contractor reasonably determines will render the Premises inaccessible or
unusable for purposes of conducting Tenant's business for a period of fifteen
(15) months or more, Tenant may elect to terminate this Lease by giving Landlord
written notice of such election within ninety (90) days following the casualty,
in which event Tenant shall have no obligation to Restore the Premises. In
addition to the foregoing, in the case of damage to or destruction of the
Premises during the last twelve (12) months of the Term (or the Option Term)
that in the reasonable opinion of Tenant's architect or contractor will render
the Premises inaccessible or unusable for purposes of conducting Tenant's
business for a period of ninety (90) days or more, Tenant may elect to terminate
this Lease by giving Landlord written notice of such election within thirty (30)
days following the casualty, in which event Tenant shall have no obligation to
Restore the Premises. In the event of any termination of this Lease as provided
herein and in the event the casualty is covered by insurance required to be
carried by Tenant under this Lease, Tenant shall, subject to Tenant's receipt of
the applicable insurance proceeds for such purpose, at its cost, clear the
Premises of debris and return the same to a safe and clean condition, and
deliver any insurance proceeds to Landlord in accordance with Section 18.5
below. If Tenant elects to terminate this Lease in accordance with this
paragraph, this Lease shall terminate


                                      -18-
<PAGE>


thirty (30) days following the date Landlord receives Tenant's written notice of
such election (the "TERMINATION DATE") upon the payment by Tenant of all Rent
and all other sums then due and payable under this Lease to and including the
Termination Date. Said termination shall not release Tenant from the obligations
and liabilities of Tenant under this Lease, actual or contingent, which have
accrued on or prior to the Termination Date. Further notwithstanding the
foregoing, if Landlord has elected to maintain the Special Form (fka All Risk)
insurance pursuant to Section 20.4, then in the case of damage of the type
covered by such Special Form (fka All Risk) insurance, Tenant's obligation to
Restore shall be subject to Tenant's receipt of funds sufficient to perform such
Restoration (excluding Tenant's personal property, furniture and equipment),
less the amount of any deductible, which amount Tenant shall be responsible
for).

18.3     RECONSTRUCTION AND REPAIR REQUIREMENTS. Tenant shall obtain Landlord's
prior approval of all plans for Restoration work performed by Tenant, which
approval shall not be unreasonably withheld, conditioned or delayed. If Landlord
fails to respond to any written request for such approval from Tenant within ten
(10) days after Tenant's second request (Tenant's original request to be deemed
the first notice), Tenant's request for approval of the Restoration plans shall
be deemed approved.

18.4     NO RENT ABATEMENT DURING RECONSTRUCTION. There shall be no Rent
abatement during Restoration of the Premises or during that period after any
casualty and prior to commencement of Restoration.

Notwithstanding the foregoing, in the event Landlord elects to maintain rental
loss insurance pursuant to Section 20.4, then the following shall apply: In the
event that as a result of any casualty damage to the Premises, Tenant is
prevented from using, and does not use, the Premises or does not use some
portion thereof, then the Rent shall be abated or reduced, as the case may be,
during the period that Tenant continues to be so prevented from using and does
not use the Premises or does not use some portion thereof, in the proportion
that the rentable square feet of the portion of the Premises that Tenant is
prevented from using, and does not use, bears to the total rentable square feet
of the Premises; provided, however, Tenant shall only be entitled to such
abatement so long as Tenant is complying with its Restoration obligations under
Section 18.1 and in no event may such abatement continue beyond the later to
occur of (i) twelve (12) months following the casualty or (ii) the expiration
date of coverage under Landlord's rental loss insurance policy. Notwithstanding
the foregoing to the contrary, if the damage is due to the willful or
intentional misconduct of Tenant or any Tenant Parties, there shall be no
abatement of Rent unless such abatement (i) is covered by the rental loss
insurance maintained by Landlord or (ii) would have been covered by the rental
insurance loss insurance required to be maintained under Section 20.4 in the
event Landlord has failed to maintain such insurance.

18.5     ADJUSTMENT OF LOSS AND DISBURSEMENT OF INSURANCE PROCEEDS UPON
RESTORATION. Except for Restoration that is reasonably expected to cost less
than One Hundred Thousand Dollars ($100,000), Landlord shall have the right to
participate with Tenant in the adjustment of the loss with the insurance
company(ies) and all proceeds of the insurance policies maintained pursuant to
Section 20.1(a) ("PROCEEDS") shall be deposited with a depository acceptable to
Landlord and Tenant (the "DEPOSITORY"). If the Proceeds are insufficient to
cover the anticipated cost of Restoration, Tenant shall deposit with the
Depository prior to the commencement of Restoration funds in the amount of such
deficiency. The Depository shall disburse the Proceeds and Tenant's funds, if
applicable, during the course of Restoration in accordance with customary
construction disbursements, including a ten percent (10%) retention. If, after
the Restoration has been completed in accordance with the terms of this Lease,
there are remaining funds held by the Depository, then such funds (after first
deducting from such funds the fees and expenses of the Depository) shall be
delivered to Tenant. If there are not sufficient funds remaining to pay for the
Depository's fees and expenses, Landlord and Tenant shall be equally responsible
for the payment of same.

18.6     DISBURSEMENT OF INSURANCE PROCEEDS UPON TERMINATION. Upon any
termination of this Lease under the provisions of this Article 18, all proceeds
from insurance policies maintained under Section 20 (other than proceeds
attributable to Tenant's personal property and Tenant Changes paid for by Tenant
that Landlord previously informed Tenant would have to be removed upon the
expiration or earlier termination of this Lease) shall be disbursed and paid to
Landlord, less such amounts that are used by Tenant in clearing any debris from
the Premises and returning the Premises to a safe and clean condition as
required by Section 18.1 above.

18.7     WAIVER OF TERMINATION. The agreements contained in this Article 18
provide a material part of the consideration for this Lease and in bargaining
for and obtaining its rights under this Article 18, Landlord and Tenant waive
any right to terminate this Lease under Section 1932 and/or 1933 of the Civil
Code of California, or any similar statute or law now or hereafter in force.

19.      EMINENT DOMAIN.

19.1     TOTAL OR PARTIAL TAKING. In case all of the Premises, or such part
thereof as shall materially and substantially interfere with Tenant's ability to
conduct its business upon the Premises, shall be taken for any public or
quasi-public purpose by any lawful power or authority by exercise of the right
of appropriation, condemnation or eminent domain, or sold to prevent such
taking, Tenant shall have the right to terminate this Lease effective as of the
date possession is required to be surrendered to said authority. Tenant shall
not assert any claim against Landlord or the taking authority for any
compensation because of such taking, and Landlord shall be entitled to receive
the entire amount of any award without


                                      -19-
<PAGE>


deduction for any estate or interest of Tenant; provided, however, in the event
of such a taking, Tenant shall be entitled to such portion of the award as shall
be attributable to goodwill and for damage to, or the cost of removal of,
Tenant's personal property, Tenant's relocation expenses and any other damage to
Tenant's business by reason of such taking. In the event this Lease is not
terminated following a taking, Landlord shall be entitled to the entire amount
of the award without deduction for any estate or interest of Tenant, Landlord
shall restore the Premises to substantially their same condition prior to such
partial taking to the extent of any award proceeds received by Landlord, and a
fair and equitable abatement shall be made to Tenant for the Rent corresponding
to the time during which, and to the part of the Premises of which, Tenant shall
be so deprived on account of such taking and restoration. If the award proceeds
from the taking are insufficient to restore the Premises as required by the
preceding sentence and Landlord does not provide its own funds to so restore the
Premises, and if as a result thereof Tenant's ability to use the Premises as
contemplated by this Lease is materially and substantially impaired, then Tenant
may elect to terminate this Lease by giving Landlord written notice thereof;
provided, however, Landlord may rescind such termination by giving Tenant
written notice within ten (10) business days following Landlord's receipt of
such termination notice from Tenant that Landlord will provide the necessary
funds to so restore the Premises.

19.2     TAKING OF PARKING AREA. In the event there shall be a taking of the
parking areas such that Landlord can no longer provide Tenant with parking
sufficient to comply with the provisions of this Lease, Tenant may, at its sole
option, elect to terminate this Lease by written notice to Landlord; provided
however, Tenant shall not be entitled to terminate this Lease as provided herein
so long as commercially reasonable substitute parking is made available for use
by Tenant (at no additional charge to Tenant) within the Project, in other
substitute parking facilities within a reasonable walking distance from the
Buildings and/or otherwise in any other area in the Kearny Mesa area of San
Diego so long as Landlord provides shuttle service to the Buildings (to the
extent reasonably necessary), not later than ninety (90) days from the date of
the taking.

19.3     TEMPORARY TAKING. In the event of taking of the Premises or any part
thereof for temporary use, (i) this Lease shall be and remain unaffected thereby
and Rent shall not abate, and (ii) Tenant shall be entitled to receive for
itself such portion or portions of any award made for such use with respect to
the period of the taking which is within the Lease Term. For purposes of this
Section 19.2, a temporary taking shall be defined as a taking for a period of
one (1) year or less.

19.4     WAIVER OF TERMINATION. Tenant and Landlord waive any right to terminate
this Lease under Section 1265.130 of the California Code of Civil Procedure, or
any similar statute or law now or hereafter in force.

20.      TENANT'S INSURANCE.

20.1     TYPES OF INSURANCE. On or before the earlier of the Early Occupancy
Date or the date Tenant commences or causes to be commenced any work of any type
in or on any portion of the Premises, and continuing thereafter until the
expiration of the Term, Tenant shall obtain and keep in full force and effect
respecting the Premises, the following insurance:

(a)      Subject to Section 20.4, Special Form (fka All Risk) insurance (with
         commercially reasonable deductibles, taking into consideration the
         financial capacity, credit rating and capitalization of Tenant),
         including fire and extended coverage, sprinkler leakage (including
         earthquake sprinkler leakage), vandalism, malicious mischief,
         earthquake and flood coverage upon property of every description and
         kind located on the Premises, including, without limitation, furniture,
         equipment and any other personal property, any Tenant Changes, the
         Improvements, the Tenant Improvements, and the Buildings in an amount
         not less then the full replacement cost thereof; provided, however,
         that notwithstanding anything above to the contrary, the earthquake and
         flood coverage described above shall not be required for Tenant's
         furniture, equipment and personal property.

(b)      Commercial general liability insurance coverage, on an occurrence
         basis, including personal injury, bodily injury (including wrongful
         death), broad form property damage, operations hazard, owner's
         protective coverage, contractual liability (including Tenant's
         indemnification obligations under this Lease, including Section 17
         hereof), host liquor liability (if Tenant serves or stores alcohol on
         the Premises), products and completed operations liability, which
         commercial general liability insurance shall be for a general aggregate
         of not less than One Million Dollars ($1,000,000.00) per occurrence
         with "umbrella" or excess liability coverage of not less than Five
         Million Dollars ($5,000,000). The limits such commercial general
         liability insurance shall be increased every five (5) years during the
         Term of this Lease to an amount reasonably required by Landlord but in
         no event shall the limits of such insurance be increased to an amount
         which is greater than that required of tenants of Comparable Buildings
         in the Kearny Mesa area of San Diego, taking into account the size of
         the Premises and the financial strength of Tenant.

(c)      Worker's compensation and employer's liability insurance, in statutory
         amounts and limits, covering all persons employed by Tenant in
         connection with any work done in, on or about the Premises for which
         claims for death or bodily injury could be asserted against Landlord,
         Tenant or the Premises.


                                      -20-
<PAGE>


(d)      Loss of income, extra expense and business interruption insurance
         covering a minimum of twelve (12) months of Tenant's Rent and such
         additional amounts as will reimburse Tenant for direct or indirect loss
         of earnings attributable to all perils commonly insured against by
         prudent tenants or attributable to prevention of access to the Premises
         or Tenant's parking areas as a result of such perils.

(e)      Any other form or forms of insurance as Tenant or Landlord or the
         mortgagees of Landlord may reasonably require from time to time, in
         form, amounts and for insurance risks against which a prudent tenant
         would protect itself, but only to the extent such risks and amounts are
         available in the insurance market at commercially reasonable costs and
         are typically required of tenants of Comparable Buildings in the Kearny
         Mesa area of San Diego taking into account the size of the Premises and
         the financial strength of Tenant. Despite the foregoing, Tenant shall
         not be required to carry earthquake insurance on the Buildings but
         Tenant shall promptly reimburse Landlord, as additional rent, all
         actual and documented costs of earthquake insurance that may be carried
         by Landlord on the Buildings.

20.2     REQUIREMENTS. Each policy required to be obtained by Tenant hereunder
shall: (a) be issued by insurers authorized to do business in the state in which
the Premises is located and rated not less than financial class VII, and not
less than policyholder rating A- in the most recent version of Best's Key Rating
Guide (provided that, in any event, the same insurance company shall provide the
coverages described in Sections 20.1(a) and 20.1(d) above); (b) be in form
reasonably satisfactory from time to time to Landlord; (c) name Tenant as named
insured thereunder and shall name Landlord and, at Landlord's request, such
other persons or entities of which Tenant has been informed in writing, as
additional insureds (with respect to the insurance described in Section 20.1(a)
above, as loss-payees) thereunder, all as their respective interests may appear;
(d) not have a deductible amount exceeding Fifty Thousand Dollars ($50,000.00),
which deductible amount shall be deemed self-insured with a full waiver of
subrogation; (e) specifically provide that the insurance afforded by such policy
for the benefit of the additional insureds shall be primary, and any insurance
carried by the additional insureds shall be excess and non-contributing; (f)
contain an endorsement that the insurer waives its right to subrogation as
described in Section 21 below; (g) require the insurer to notify the additional
insureds in writing not less than thirty (30) days prior to any reduction in
coverage, cancellation or other termination thereof; (h) contain a cross
liability or severability of interest endorsement; and (i) provide that any loss
otherwise payable thereunder shall be payable notwithstanding any act or
omission of Landlord or Tenant which might, absent such provision, result in a
forfeiture of all or a part of such insurance payment Tenant agrees to deliver
to Landlord, as soon as practicable after the placing of the required insurance,
but in no event later than the date Tenant enters all or any part of the
Premises, certificates from the insurance company evidencing the existence of
such insurance and Tenant's compliance with the foregoing provisions of this
Section 20). Tenant shall cause replacement certificates to be delivered to
Landlord prior to the expiration of any such policy or policies. If any such
initial or replacement certificates are not furnished within the time(s)
specified herein, Tenant shall be deemed to be in material default under this
Lease without the benefit of any additional notice or cure period provided in
Section 22.1 below, and Landlord shall have the right, but not the obligation,
following at least an additional five (5) business days' notice to Tenant, to
procure such policies and certificates at Tenant's expense. Despite any
provision to the contrary in this Section 20, Tenant's obligation to carry the
specified insurance may be brought within the coverage of a so-called blanket
policy or policies of property insurance carried and maintained by Tenant;
provided, however, that the coverage afforded Landlord, and Landlord's
mortgagees (if any) will not be reduced or diminished by reason of the use of
such blanket policy of insurance.

20.3     EFFECT ON INSURANCE. Tenant shall not do or permit to be done anything
which will violate or invalidate any insurance policy maintained by Tenant
hereunder. If Landlord becomes the insuring party under this Lease and if
Tenant's occupancy or conduct of its business in or on the Premises results in
any increase in premiums for any insurance carried by Landlord, and Landlord or
its insurer can reasonably substantiate the nature of Tenant's activities which
are causing the increase in such premiums, Tenant shall pay such increase as
additional rent within ten (10) days after being billed therefor by Landlord. If
any insurance coverage carried by Landlord shall be cancelled or reduced (or
cancellation or reduction thereof shall be threatened) by reason of the use or
occupancy of the Premises by Tenant or by anyone permitted by Tenant to be upon
the Premises, and if Tenant fails to remedy such condition within thirty (30)
days after notice thereof (or commence such cure within such thirty (30) day
period if such matter is not capable of being fully cured within thirty (30)
days), Landlord shall have all remedies provided in this Lease, at law or in
equity, including, without limitation, the right (but not the obligation) to
enter upon the Premises and attempt to remedy such condition at Tenant's cost.

20.4     LANDLORD'S OPTION TO INSURE. Landlord shall have the option (the
"INSURANCE OPTION") from time to time to maintain the Special Form (fka All
Risk) insurance referred to in Section 20.1(a) above covering the property
described therein (other than Tenant's personal property, furniture and
equipment, which Tenant shall continue to insure) and/or rental loss insurance
covering Tenant's rental obligations hereunder for a period of at least twelve
(12) months by giving Tenant written notice thereof. If Landlord elects to
maintain such insurance, Tenant shall have no obligation to maintain such
insurance on the property covered thereby until Landlord elects not to maintain
such insurance by giving Tenant at least sixty (60) days' prior written notice
thereof. Tenant shall reimburse Landlord, as additional rent, the cost of such
insurance within thirty (30) days following receipt of an invoice therefor;
provided, however, that with respect to any earthquake insurance deductible
applicable to the Premises, the cost of such deductible amount shall be
amortized by Landlord over the useful life of the improvement that is required
to be restored (and Tenant shall pay to Landlord such amortized amount on a
monthly basis together with


                                      -21-
<PAGE>


Tenant's payment of Monthly Rent hereunder). As of the date hereof, Landlord and
Tenant acknowledge and agree that Landlord has exercised the Insurance Option;
provided, however, that Landlord shall have the right, from time to time, to
elect, in Landlord's sole and absolute discretion, to rescind the exercise of
such Insurance Option upon at least sixty (60) days prior written notice to
Tenant.

21.      WAIVER OF SUBROGATION.

21.1     WAIVER. Landlord and Tenant hereby waive their rights against each
other with respect to any claims or damages or losses which are caused by or
result from (a) occurrences insured against under any insurance policy carried
by Tenant pursuant to the provisions of this Lease, or (b) occurrences which
would have been covered under any insurance required to be obtained and
maintained by Landlord or Tenant under Section 20 of this Lease had such
insurance been obtained and maintained as required therein. The foregoing waiver
shall be in addition to, and not a limitation of, any other waivers or releases
contained in this Lease.

21.2     WAIVER OF INSURERS. Landlord and Tenant shall each cause each insurance
policy required to be obtained by it pursuant to Section 20 to provide that the
insurer waives all rights of recovery by way of subrogation against the other
party in connection with any claims, losses and damages covered by such policy.
If either Landlord or Tenant fails to maintain the insurance required hereunder,
such risks shall be deemed to be self-insured with a deemed full waiver of
subrogation as set forth in the immediately preceding sentence.

22.      TENANT'S DEFAULT AND LANDLORD'S REMEDIES.

22.1     TENANT'S DEFAULT. The occurrence of any one or more of the following
events shall constitute a default under this Lease by Tenant:

(a)      the failure by Tenant to make any payment of Rent or any other payment
         required to be made by Tenant hereunder, within five (5) business days
         of written notice from Landlord that such payment was not received;

(b)      the failure by Tenant to observe or perform any of the express or
         implied covenants or provisions of this Lease to be observed or
         performed by Tenant, other than as specified in Sections 22.1(a) or (b)
         above, where such failure shall continue for a period of thirty (30)
         days after written notice thereof from Landlord to Tenant; provided,
         however, that if the nature of Tenant's default is such that it may be
         cured but more than thirty (30) days are reasonably required for its
         cure, then Tenant shall not be deemed to be in default if Tenant shall
         commence such cure within said thirty (30) day period and thereafter
         diligently prosecute such cure to completion;

(c)      (i) the making by Tenant or any guarantor hereof of any general
         assignment for the benefit of creditors, (ii) the filing by or against
         Tenant or any guarantor hereof of a petition to have Tenant adjudged a
         bankrupt or a petition for reorganization or arrangement under any law
         relating to bankruptcy (unless, in the case of a petition filed against
         Tenant or any guarantor hereof, the same is dismissed within sixty (60)
         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 or of substantially all
         of any guarantor's assets, where possession is not restored to Tenant
         within sixty (60) days, or (iv) the attachment, execution or other
         judicial seizure of substantially all of Tenant's assets located at the
         Premises or of substantially all of any guarantor's assets or of
         Tenant's interest in this Lease where such seizure is not discharged
         within sixty (60) days;

(d)      Tenant or any guarantor hereof shall be liquidated or dissolved or
         shall begin proceedings towards its liquidation or dissolution;

(e)      the failure of Tenant to renew the Letter of Credit when and as
         required hereunder; or

(f)      The insolvency of the bank issuing the Letter of Credit and/or the
         failure of such bank to have at least a "C" issuer rating under the
         Thomson Financial Bank Watch or an equivalent rating service reasonably
         selected by Landlord, unless Tenant, within thirty (30) days of receipt
         of Landlord's written notice, has not replaced such bank with a bank
         which qualifies under this Section 22.1(f) and is otherwise reasonably
         acceptable to Landlord.

Any notice given under this Section 22.1 shall be in lieu of, and not in
addition to, any notice required under California Code of Civil Procedure,
Section 1161.

22.2     LANDLORD'S REMEDIES; TERMINATION. In the event of any such default by
Tenant, in addition to any other remedies available to Landlord under this
Lease, at law or in equity, Landlord shall have the immediate option to
terminate this Lease and all rights of Tenant hereunder. In the event that
Landlord shall elect to so terminate this Lease, then Landlord may recover from
Tenant:

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


                                      -22-
<PAGE>


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

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

(d)      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 therefrom including, but not limited to: unamortized Tenant
         Improvement costs; reasonable attorneys' fees; unamortized brokers'
         commissions; the costs of refurbishment, alterations, renovation and
         repair of the Premises; and removal (including the repair of any damage
         caused by such removal) and storage (or disposal) of Tenant's personal
         property, equipment, fixtures, Tenant Changes, Tenant Improvements and
         any other items which Tenant is required under this Lease to remove but
         does not remove.

As used in Sections 22.2(a) and 22.2(b) above, the "worth at the time of award"
is computed by allowing interest at the Interest Rate set forth in Section 1.10
of the Summary. As used in Section 22.2(c) above, the "worth at the time of
award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent
(1%).

22.3     LANDLORD'S REMEDIES; RE-ENTRY RIGHTS. In the event of any such default
by Tenant, in addition to any other remedies available to Landlord under this
Lease, at law or in equity, Landlord shall also have the right as permitted by
applicable law, with or without terminating this Lease, to re-enter the Premises
and remove all persons and property from the Premises; such property may be
removed, stored and/or disposed of pursuant to Section 12.4 of this Lease or any
other procedures permitted by applicable law. No re-entry or taking possession
of the Premises by Landlord pursuant to this Section 22.3, and no acceptance of
surrender of the Premises or other action on Landlord's part, shall be construed
as an election to terminate this Lease unless a written notice of such intention
be given to Tenant or unless the termination thereof be decreed by a court of
competent jurisdiction.

22.4     LANDLORD'S REMEDIES; CONTINUATION OF LEASE. In the event of any such
default by Tenant, in addition to any other remedies available to Landlord under
this Lease, at law or in equity, Landlord shall have the right to continue this
Lease in full force and effect, whether or not Tenant shall have abandoned the
Premises. The foregoing remedy shall also be available to Landlord pursuant to
California Civil Code Section 1951.4 and any successor statute thereof in the
event Tenant has abandoned the Premises. In the event Landlord elects to
continue this Lease in full force and effect pursuant to this Section 22.4, then
Landlord shall be entitled to enforce all of its rights and remedies under this
Lease, including the right to recover rent as it becomes due. Landlord's
election not to terminate this Lease pursuant to this Section 22.4 or pursuant
to any other provision of this Lease, at law or in equity, shall not preclude
Landlord from subsequently electing to terminate this Lease or pursuing any of
its other remedies.

22.5     LANDLORD'S RIGHT TO PERFORM. Except as specifically provided otherwise
in this Lease, all covenants and agreements by Tenant under this Lease shall be
performed by Tenant at Tenant's sole cost and expense and without any abatement
or offset of rent. Except as specifically provided otherwise in this Lease, if
Tenant shall fail to pay any sum of money (other than Rent) or perform any other
act on its part to be paid or performed hereunder and such failure shall
continue for ten (10) days with respect to monetary obligations (or thirty (30)
days with respect to non-monetary obligations) after Tenant's receipt of written
notice thereof from Landlord (except that no notice will be required in the
event of an emergency), Landlord may, following an additional five (5) days
written notice to Tenant, without waiving or releasing Tenant from any of
Tenant's obligations, make such payment or perform such other act on behalf of
Tenant. All sums so paid by Landlord and all necessary incidental costs incurred
by Landlord in performing such other acts shall be payable by Tenant to Landlord
within ten (ten) days after demand therefor as additional rent.

22.6     INTEREST. Except as specifically provided otherwise in this Lease, if
any amount payable by Landlord or Tenant hereunder is not received by the party
entitled to such payment within thirty (30) days of the date when due, it shall
bear interest at the Interest Rate set forth in Section 1.10 of the Summary from
the date due until paid. All interest, and any late charges imposed upon Tenant
pursuant to Section 22.7 below, shall be considered additional rent due from
Tenant to Landlord under the terms of this Lease.

22.7     LATE CHARGES. Tenant acknowledges that, in addition to interest costs,
the late payments by Tenant to Landlord of any Rent or other sums due under this
Lease will cause Landlord to incur costs not contemplated by this Lease, the
exact amount of such costs being extremely difficult and impractical to fix.
Such other costs include, without limitation, processing, administrative and
accounting charges and late charges that may be imposed on Landlord by the terms
of any mortgage, deed of trust or related loan documents encumbering the
Premises. Accordingly, if any installment of Rent or any other amount payable by
Tenant hereunder is not received by Landlord by the due date thereof, Tenant
shall pay to Landlord an additional sum of ten percent (10%) of the overdue
amount as a late charge, but in no event more than the maximum late charge
allowed by law. The parties agree that such late charge represents a fair and
reasonable estimate of the costs that Landlord will incur by reason of any late
payment as hereinabove referred to by Tenant, and the payment of late charges
and interest are distinct and separate


                                      -23-
<PAGE>


in that the payment of interest is to compensate Landlord for the use of
Landlord's money by Tenant, while the payment of late charges is to compensate
Landlord for Landlord's processing, administrative and other costs incurred by
Landlord as a result of Tenant's delinquent payments. Acceptance of a late
charge or interest shall not constitute a waiver of Tenant's default with
respect to the overdue amount or prevent Landlord from exercising any of the
other rights and remedies available to Landlord under this Lease or at law or in
equity now or hereafter in effect.

22.8     Intentionally Omitted.

22.9     RIGHTS AND REMEDIES CUMULATIVE. All rights, options and remedies of
Landlord and Tenant contained in this Section 22 or in Section 23 below and
elsewhere in this Lease shall be construed and held to be cumulative, and no one
of them shall be exclusive of the other, and Landlord or Tenant, as applicable,
shall have the right to pursue any one or all of such remedies or any other
remedy or relief which may be provided by law or in equity, whether or not
stated in this Lease. Nothing in this Section 22 or in Section 23 shall be
deemed to limit or otherwise affect the indemnification obligations of Landlord
and Tenant pursuant to any provision of this Lease.

22.10    WAIVER OF REDEMPTION. Tenant hereby waives and surrenders for itself
and all those claiming under it, including creditors of all kinds, (i) any right
and privilege which it or any of them may have under any present or future law
to redeem any of the Premises or to have a continuance of this Lease after
termination of this Lease or of Tenant's right of occupancy or possession
pursuant to any court order or any provision hereof, and (ii) the benefits of
any present or future law which exempts property from liability for debt or for
distress for rent.

22.11    COSTS UPON DEFAULT AND LITIGATION. Tenant shall pay to Landlord and its
mortgagees as additional rent all the expenses incurred by Landlord or its
mortgagees in connection with any default by Tenant hereunder or the exercise of
any remedy by reason of any default by Tenant hereunder, including reasonable
attorneys' fees and expenses. If Landlord or its mortgagees shall be made a
party to any litigation commenced against Tenant or any litigation pertaining to
this Lease or the Premises, at the option of Landlord and/or its mortgagees,
Tenant, at its expense, shall provide Landlord and/or its mortgagees with
counsel approved by Landlord and/or its mortgagees and shall pay all costs
incurred or paid by Landlord and/or its mortgagees in connection with such
litigation.

23.      LANDLORD'S DEFAULT. Landlord shall be in default in the performance of
any obligation required to be performed by Landlord under this Lease if (i)
Landlord is obligated to make a payment of money to Tenant and Landlord fails to
make such payment within ten (10) days of written notice from Tenant that the
same was not paid when due, or (ii) such obligation is other than the payment of
money and Landlord has failed to perform such obligation within thirty (30) days
after the receipt of written notice from Tenant specifying in detail Landlord's
failure to perform; provided however, that if the nature of Landlord's
obligation is such that more than thirty (30) days are required for its
performance, then Landlord shall not be deemed in default if it commences such
performance within such thirty (30) day period and thereafter diligently pursues
the same to completion. Upon any such uncured default by Landlord, Tenant may
exercise any of its rights provided in law or at equity; provided, however: (a)
Tenant shall have no right to offset or abate Rent in the event of any default
by Landlord under this Lease, except to the extent offset rights are
specifically provided to Tenant in this Lease; (b) Tenant's rights and remedies
hereunder shall be limited to the extent (i) Tenant has expressly waived in this
Lease any of such rights or remedies, and/or (ii) this Lease otherwise expressly
limits Tenant's rights or remedies, including the limitation on Landlord's
liability contained in Section 30 hereof; and (c) in no event shall Landlord be
liable for consequential damages or loss of business profits.

24.      SUBORDINATION. At the request of Landlord or any mortgagee of a
mortgage or a beneficiary of a deed of trust now or hereafter encumbering all or
any portion of the Premises, or any lessor of any ground or master lease now or
hereafter affecting all or any portion of the Premises, this Lease shall be
subject and subordinate at all times to such ground or master leases (and such
extensions and modifications thereof), and to the lien of such mortgages and
deeds of trust (as well as to any advances made thereunder and to all renewals,
replacements, modifications and extensions thereof); provided, however, no
subordination of this Lease to a future ground or master lease or mortgage or
deed of trust shall result in Tenant being disturbed in its possession of the
Premises or in the enjoyment of its rights under this Lease so long as Tenant is
not in default beyond any applicable notice and cure period with respect to its
obligations hereunder, and any commercially reasonable subordination agreement
which Landlord, any mortgagee, beneficiary or lessor requests Tenant to execute
to effect or confirm such subordination shall so provide. Notwithstanding the
foregoing, Landlord shall have the right to subordinate or cause to be
subordinated any or all ground or master leases or the lien of any or all
mortgages or deeds of trust to this Lease. In the event that any ground or
master lease terminates for any reason or any mortgage or deed of trust is
foreclosed or a conveyance in lieu of foreclosure is made for any reason, at the
election of Landlord's successor in interest, Tenant shall attorn to and become
the tenant of such successor. Subject to Tenant's receipt of a commercially
reasonable non-disturbance agreement, Tenant hereby waives its rights under any
current or future law which gives or purports to give Tenant any right to
terminate or otherwise adversely affect this Lease and the obligations of Tenant
hereunder in the event of any such foreclosure proceeding or sale. Subject to
the foregoing, Tenant covenants and agrees to execute and deliver to Landlord
within ten (10) business days after receipt of written demand by Landlord and in
the form reasonably required by Landlord, any additional commercially reasonable
documents evidencing the priority or subordination of this Lease with respect to
any such ground or master lease or the lien of any such mortgage or deed of
trust or Tenant's agreement to attorn. Notwithstanding anything


                                      -24-
<PAGE>


above to the contrary, in the event that, as of the date hereof, there exist any
lessor, mortgage holder or deed of trust beneficiary of Landlord's interest in
the Premises then Landlord shall deliver to Tenant, prior to the Commencement
Date, a subordination, non-disturbance and attornment agreement in a
commercially reasonable form required by such existing ground lessor, mortgage
holder or deed of trust beneficiary of Landlord's interest in the Premises
("NON-DISTURBANCE AGREEMENT"), which Non-Disturbance Agreement Tenant shall
execute and deliver to Landlord within ten (10) business days after Tenant's
receipt thereof. Within ninety (90) days after Landlord's receipt of the
Non-Disturbance Agreement (executed by Tenant), Landlord shall cause the
Non-Disturbance Agreement to be executed by such ground lessors, mortgage
holders and deed of trust beneficiaries in existence as of the date hereof. Such
Non-Disturbance Agreement shall include the obligation of any current or future
holder of a superior interest to recognize Tenant's rights specifically set
forth in this Lease.

25.      ESTOPPEL CERTIFICATE.

25.1     TENANT'S OBLIGATIONS. Within ten (10) business days following
Landlord's written request, Tenant shall execute and deliver to Landlord an
estoppel certificate, in a form substantially similar to the form of EXHIBIT "F"
attached hereto, certifying: (a) the Commencement Date of this Lease; (b) that
this Lease is unmodified and in full force and effect (or, if modified, that
this Lease is in full force and effect as modified, and stating the date and
nature of such modifications); (c) the date to which the Rent and other sums
payable under this Lease have been paid; (d) that there are not, to the best of
Tenant's knowledge, any defaults under this Lease by either Landlord or Tenant,
except as specified in such certificate; and (e) such other matters as are set
forth in EXHIBIT "F" or are reasonably requested by Landlord. Any such estoppel
certificate delivered pursuant to this Section 25.1 may be relied upon by any
mortgagee, beneficiary, purchaser or prospective purchaser of any portion of the
Premises, as well as their assignees. Landlord hereby agrees to provide to
Tenant, within ten (10) business days of Tenant's written request, an estoppel
certificate signed by Landlord, containing the same types of information as set
forth above, with such changes as are reasonably necessary to reflect that the
estoppel certificate is being granted to Tenant by Landlord, rather than being
granted by Tenant to Landlord or to a lender.

25.2     TENANT'S FAILURE TO DELIVER. Failure of Landlord or Tenant to deliver
such estoppel certificate within such time shall constitute a default hereunder
without the applicability of notice and cure periods specified above and shall
be conclusive upon the other party that: (a) this Lease is in full force and
effect without modification, except as may be represented by Landlord or Tenant,
as applicable; (b) there are no uncured defaults in Landlord's or Tenant's
performance (other than the failure to deliver the estoppel certificate); and
(c) not more than one (1) month's Rent has been paid in advance.

26.      MODIFICATION AND CURE RIGHTS OF LANDLORD'S MORTGAGEES AND LESSORS.

26.1     MODIFICATIONS. If, in connection with Landlord's obtaining or entering
into any financing or ground lease for any portion of the Premises, the lender
or ground lessor shall request modifications to this Lease, Tenant shall, within
ten (10) business days after request therefor, execute an amendment to this
Lease including such modifications, provided such modifications are reasonable,
(i) do not increase the obligations of Tenant hereunder, (ii) do not modify the
Term or the Permitted Use of the Premises, or (iii) otherwise adversely affect
the leasehold estate created hereby or Tenant's rights hereunder.

26.2     CURE RIGHTS. In the event of any default on the part of Landlord,
Tenant will give notice by registered or certified mail to any beneficiary of a
deed of trust or mortgagee covering the Premises or ground lessor of Landlord
whose address shall have been furnished to Tenant.

27.      QUIET ENJOYMENT. Landlord covenants and agrees with Tenant that, upon
Tenant performing all of the covenants and provisions on Tenant's part to be
observed and performed under this Lease (including payment of rent hereunder),
Tenant shall and may peaceably and quietly have, hold and enjoy the Premises, in
accordance with and subject to the terms and conditions of this Lease, as
against all persons claiming by, through or under Landlord.

28.      TRANSFER OF LANDLORD'S INTEREST. The term "Landlord" as used in this
Lease, so far as covenants or obligations on the part of the Landlord are
concerned, shall be limited to mean and include only the owner or owners, at the
time in question, of the fee title to, or a lessee's interest in a ground lease
of, the Premises. In the event of any transfer or conveyance of any such title
or interest (other than a transfer for security purposes only), the transferor
shall be automatically relieved of all covenants and obligations on the part of
Landlord contained in this Lease accruing after the date of such transfer or
conveyance, provided that the transferee of Landlord's interest has expressly
agreed to assume, in writing, the performance of all of the covenants and
obligations of Landlord under this Lease following the date of such transfer.
Landlord and Landlord's transferees and assignees shall have the absolute right
to transfer all or any portion of their respective title and interest in the
Premises and/or this Lease without the consent of Tenant, and such transfer or
subsequent transfer shall not be deemed a violation on Landlord's part of any of
the terms and conditions of this Lease.

29.      LIMITATION ON LANDLORD'S LIABILITY. Notwithstanding anything contained
in this Lease to the contrary, the obligations of Landlord under this Lease
(including any actual or alleged breach or default by Landlord) do not
constitute personal obligations of the individual partners, directors, officers
or shareholders of Landlord or Landlord's partners, and Tenant shall not seek
recourse against the individual partners, directors, officers or shareholders of
Landlord or Landlord's partners, or any of their personal assets for
satisfaction of any liability with respect to this Lease. In addition, in
consideration of


                                      -25-
<PAGE>


the benefits accruing hereunder to Tenant and notwithstanding anything contained
in this Lease to the contrary, Tenant hereby covenants and agrees for itself and
all of its successors and assigns that the liability of Landlord for its
obligations under this Lease (including any liability as a result of any actual
or alleged failure, breach or default hereunder by Landlord), shall be limited
solely to, and Tenant's and its successors' and assigns' sole and exclusive
remedy shall be against, Landlord's interest in the Project, including the
rents, issues and profits of Landlord therefrom and no other assets of Landlord.

30.      MISCELLANEOUS.

30.1     GOVERNING LAW. This Lease shall be governed by, and construed pursuant
to, the laws of the state in which the Premises are located.

30.2     SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 28 above,
and except as otherwise provided in this Lease, all of the covenants, conditions
and provisions of this Lease shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives and permitted successors and assigns; provided, however, no
rights shall inure to the benefit of any Transferee of Tenant unless the
Transfer to such Transferee is made in compliance with the provisions of Section
14.

30.3     NO MERGER. The voluntary or other surrender of this Lease by Tenant or
a mutual termination thereof shall not work as a merger and shall, at the option
of Landlord, either (a) terminate all or any existing subleases, or (b) operate
as an assignment to Landlord of Tenant's interest under any or all such
subleases.

30.4     PROFESSIONAL FEES. If either Landlord or Tenant should bring suit or
arbitration against the other with respect to this Lease, including for unlawful
detainer or any other relief against the other hereunder, then all costs and
expenses incurred by the prevailing party therein (including, without
limitation, its actual appraisers', accountants', attorneys' and other
professional fees, expenses and court costs), shall be paid by the other party.

30.5     WAIVER. The waiver by either party of any breach by the other party of
any term, covenant or condition herein contained shall not be deemed to be a
waiver of any subsequent breach of the same or any other term, covenant and
condition herein contained, nor shall any custom or practice which may become
established between the parties in the administration of the terms hereof be
deemed a waiver of, or in any way affect, the right of any party to insist upon
the performance by the other in strict accordance with said terms. No waiver of
any default of either party hereunder shall be implied from any acceptance by
Landlord or delivery by Tenant (as the case may be) of any Rent or other
payments due hereunder or any omission by the non-defaulting party to take any
action on account of such default if such default persists or is repeated, and
no express waiver shall affect defaults other than as specified in said waiver.
The subsequent acceptance of Rent hereunder by Landlord shall not be deemed to
be a waiver of any preceding breach by Tenant of any term, covenant or condition
of this Lease other than the failure of Tenant to pay the particular Rent so
accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such Rent.

30.6     TERMS AND HEADINGS; INTERPRETATION. The words "Landlord" and "Tenant"
as used herein shall include the plural as well as the singular. Words used in
any gender include other genders. The Section headings of this Lease are not a
part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof. Any deletion of language from this Lease
prior to its execution by Landlord and Tenant shall not be construed to raise
any presumption, canon of construction or implication, including, without
limitation, any implication that the parties intended thereby to state the
converse of the deleted language.

30.7     TIME. Time is of the essence with respect to performance of every
provision of this Lease in which time or performance is a factor. All references
in this Lease to "days" shall mean calendar days unless specifically modified
herein to be "business" days.

30.8     PRIOR AGREEMENTS; AMENDMENTS. This Lease, including the Summary and all
Exhibits attached hereto contains all of the covenants, provisions, agreements,
conditions and understandings between Landlord and Tenant concerning the
Premises and any other matter covered or mentioned in this Lease, and no prior
agreement or understanding, oral or written, express or implied, pertaining to
the Premises or any such other matter shall be effective for any purpose. No
provision of this Lease may be amended or added to except by an agreement in
writing signed by the parties hereto or their respective successors in interest.
The parties acknowledge that all prior agreements, representations and
negotiations are deemed superseded by the execution of this Lease to the extent
they are not expressly incorporated herein.

30.9     SEPARABILITY. The invalidity or unenforceability of any provision of
this Lease (except for Tenant's obligation to pay Rent) shall in no way affect,
impair or invalidate any other provision hereof, and such other provisions shall
remain valid and in full force and effect to the fullest extent permitted by
law.

30.10    RECORDING. Neither Landlord nor Tenant shall record this Lease.
Concurrently with the execution of this Lease , Landlord and Tenant shall each
execute a memorandum of lease ("MEMORANDUM") which shall be in the form of
Exhibit "H" attached hereto, provided that prior to recordation Tenant also
executes and delivers to Landlord, in recordable form, a properly acknowledged


                                      -26-
<PAGE>


quitclaim deed or other instrument extinguishing all of the Tenant's rights and
interest in and to the Premises, and designating Landlord as the transferee,
which deed or other instrument shall be held by Landlord and may be recorded by
Landlord only after this Lease terminates or expires (but not prior thereto).
Landlord and Tenant shall share equally in the payment of all costs of or
related to such recording, including, but not limited to, recording charges and
documentary transfer taxes (if any).

30.11    EXHIBITS AND RIDERS. All Exhibits attached to this Lease are hereby
incorporated in this Lease for all purposes as though set forth at length
herein.

30.12    AUCTIONS. Tenant shall have no right to conduct any auction in, on or
about the Premises.

30.13    ACCORD AND SATISFACTION. No payment by Tenant or receipt by Landlord of
a lesser amount than the Rent payment herein stipulated shall be deemed to be
other than on account of the Rent, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as Rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such Rent or pursue any
other remedy provided in this Lease. Tenant agrees that each of the foregoing
covenants and agreements shall be applicable to any covenant or agreement either
expressly contained in this Lease or imposed by any statute or at common law.

30.14    FINANCIAL STATEMENTS. Upon ten (10) business days prior written request
from Landlord (which Landlord may make at any time during the Term but no more
often than once in any calendar year except in connection with a proposed sale,
financing or refinancing of all or any part of the Premises), Tenant shall
deliver to Landlord a current financial statement of Tenant and any guarantor of
this Lease. Such statements shall be prepared in accordance with generally
acceptable accounting principles and certified as true in all material respects
by Tenant (if Tenant is an individual) or by an authorized officer of Tenant (if
Tenant is a corporation or limited liability company) or a general partner of
Tenant (if Tenant is a partnership). Despite the foregoing, so long as Tenant is
a publicly traded company, Tenant may fulfill the requirements of this Section
30.14 by delivering to Landlord a copy of Tenant's most recent annual report or
those statements submitted by Tenant to the Securities and Exchange Commission.

30.15    NO PARTNERSHIP. Landlord does not, in any way or for any purpose,
become a partner of Tenant in the conduct of its business, or otherwise, or
joint venturer or a member of a joint enterprise with Tenant by reason of this
Lease.

30.16    FORCE MAJEURE. In the event that either party hereto shall be delayed
or hindered in or prevented from the performance of any act required hereunder
by reason of strikes, lock-outs, labor troubles, inability to procure materials,
failure of power, governmental moratorium or other governmental action or
inaction (including failure, refusal or delay in issuing permits, approvals
and/or authorizations), injunction or court order, riots, insurrection, war,
fire, earthquake, flood or other natural disaster or other reason of a like
nature not the fault of the party delaying in performing work or doing acts
required under the terms of this Lease (but excluding delays due to financial
inability) (herein collectively, "FORCE MAJEURE DELAYS"), then performance of
such act shall be excused for the period of the delay and the period for the
performance of any such act shall be extended for a period equivalent to the
period of such delay. The provisions of this Section 30.16 shall not apply to
nor operate to excuse Landlord or Tenant from the payment of any amounts
strictly in accordance with the terms of this Lease.

30.17    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.

30.18    [Intentionally Omitted]

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

30.20    WAIVER OF JURY TRIAL. Each party hereby waives any right to a trial by
jury in any action seeking specific performance of any provision of this Lease,
for damages for any breach under this Lease, or otherwise for enforcement of any
right or remedy hereunder.

30.21    COMMON OWNERSHIP. Landlord and Tenant acknowledge that it is Landlord's
current intention to cause the ownership of the Office Building and the R & D
Building to be held by the same entity. If, however, at any time during the
Lease Term or any Option Period, Landlord determines to separate ownership of
the two (2) buildings or to separately finance the two (2) buildings (where the
lender requires separate documentation), Tenant agrees to promptly after request
from Landlord, execute commercially reasonable documents in order to separate
Tenant's lease of the Office Building portion of the Premises from the R & D
Building portion of the Premises. Any such documentation shall be on the exact
same terms as specified in this Lease but as applicable to the relevant portion
of the Premises. Landlord shall reimburse Tenant for its attorneys' fees and
costs (not to exceed Five Thousand Dollars ($5,000.00)) incurred in connection
with any such modifications to this Lease requested by Landlord or its lender in
connection with the foregoing. In addition, notwithstanding anything in this
Lease to the contrary, in no event shall Tenant be liable for any increase in
Real Property Taxes applicable to the Premises or any portion thereof which may
result from the separation of the ownership of the Office Building portion of
the


                                      -27-
<PAGE>


Premises from the R & D Building portion of the Premises (unless such separation
results from a conveyance to a third party).

31.      LEASE EXECUTION.

31.1     TENANT'S AUTHORITY. If Tenant executes this Lease as a limited
liability company, partnership or corporation, then Tenant and the persons
and/or entities executing this Lease on behalf of Tenant represent and warrant
that: (a) Tenant is a duly organized and validly existing limited liability
company, partnership or corporation, as the case may be, and is qualified to do
business in the state in which the Premises are located; (b) such persons and/or
entities executing this Lease are duly authorized to execute and deliver this
Lease on Tenant's behalf in accordance with the Tenant's operating agreement (if
Tenant is a limited liability company), Tenant's partnership agreement (if
Tenant is a partnership), or a duly adopted resolution of Tenant's board of
directors and Tenant's by-laws (if Tenant is a corporation); and (c) this Lease
is binding upon Tenant in accordance with its terms. Tenant shall, promptly
following Landlord's request therefor, deliver evidence, reasonably acceptable
to Landlord, of such qualification, organization, existence and authorization.

31.2     JOINT AND SEVERAL LIABILITY. If more than one person or entity executes
this Lease as Tenant: (a) each of them is and shall be jointly and severally
liable for the covenants, conditions, provisions and agreements of this Lease to
be kept, observed and performed by Tenant; and (b) the act or signature of, or
notice from or to, any one or more of them with respect to this Lease shall be
binding upon each and all of the persons and entities executing this Lease as
Tenant with the same force and effect as if each and all of them had so acted or
signed, or given or received such notice.

31.3     NO OPTION. The submission of this Lease for examination or execution by
Tenant does not constitute a reservation of or option for the Premises and this
Lease shall not become effective as a Lease until it has been executed by
Landlord and delivered to Tenant.

32.      SATELLITE DISHES. At any time during the Lease Term, subject to the
terms, covenants and conditions of this Section 32 and subject to the approval
of all applicable governmental entities and all governmental laws, rules,
regulations, codes and the Declarations, Tenant may install, for Tenant's own
use and at Tenant's sole cost and expense, but without the payment of any Rent
or a license or similar fee or charge, up to five (5) thirty inch (30")
satellite dishes and five (5) antennae to service the business conducted by
Tenant from within the Premises (all such equipment defined collectively as the
"TELECOMMUNICATIONS EQUIPMENT") upon the roof of the Buildings (including the
Office Building and the R & D Building). The physical appearance and the size of
the Telecommunications Equipment shall be subject to Landlord's reasonable
approval. The location of any such installation of the Telecommunications
Equipment shall be designated by Tenant subject to Landlord's reasonable
approval and Landlord may require Tenant to install screening around such
Telecommunications Equipment at Tenant's sole cost and expense, as reasonably
designated by Landlord. Tenant shall maintain such Telecommunications Equipment
at Tenant's sole cost and expense. In the event Tenant elects to exercise its
right to install the Telecommunication Equipment, then Tenant shall give
Landlord prior notice thereof. Tenant shall reimburse to Landlord the actual and
documented costs reasonably incurred by Landlord in approving such
Telecommunications Equipment not to exceed $500.00. Tenant shall remove such
Telecommunications Equipment no later than thirty (30) days following the
expiration or earlier termination of this Lease and shall repair any damage to
the Building caused by such removal and return the affected portion of the
Premises to a building standard tenant improved condition as reasonably
determined by Landlord. Such Telecommunications Equipment shall be installed
pursuant to plans and specifications approved by Landlord, which approval will
not be unreasonably withheld, conditioned or delayed, provided, however, that
Tenant shall retain Landlord's designated roofing contractor to make any
necessary penetrations to the roof in order to preserve Landlord's roof
warranty. Such Telecommunications Equipment shall, in all instances, comply with
applicable governmental laws, codes, rules and regulations. The rights contained
in this Section 32 shall be personal to the Original Tenant, any Permitted
Transferee and any assignee, sublessee or other transferee of the Original
Tenant's interest in this Lease which is consented to by Landlord if such
assignee, sublessee or other transferee occupies at least twenty-five percent
(25%) of the rentable area of either the Office Building or the R & D Building).
Landlord shall reserve the right to use the roof of the Buildings (including the
Office Building and the R & D Building) for its own use and for third-party use
for installation of similar Telecommunications Equipment (collectively, the
"LANDLORD TCE"), provided such Landlord TCE shall not interfere with Tenant's
operations on the roof of the Buildings, and provided Landlord maintains,
restores and repairs the Buildings' rooftop space associated with such Landlord
TCE. To the extent Landlord elects to install Landlord TCE on the Buildings'
rooftop, Landlord shall be responsible for the maintenance, repair and
restoration of such Landlord TCE and shall notify Tenant no less than
twenty-four (24) hours in advance of any entry/access onto the Buildings'
rooftop (except in cases of emergency where no notice shall be required).
Landlord shall indemnify, defend and hold Tenant harmless for any damage to
Tenant's Telecommunications Equipment due to the actions or omissions of
Landlord with regard to the Landlord TCE.

33.      EXISTING LEASE.

33.1     TERMINATION OF OTHER LEASE. Landlord and Tenant acknowledge the
existence of that certain other lease (as amended, the "OTHER LEASE") dated May
26, 1993 executed by and between Tenant and LBA-VFII, LLC a Delaware limited
liability company, as successor-in-interest in the Other Lease to Mitsui/SBD
America Fund 87-1 (the "OTHER LANDLORD"). The Other Landlord (by its execution
below) and


                                      -28-
<PAGE>


Tenant acknowledge and agree that effective as of February 1, 2001, the Other
Lease (pertaining to the second (2nd) floor portion of the Other Premises only)
shall terminate; provided, however, that Tenant acknowledges and agrees that
Tenant shall continue to be liable under the Other Lease for (i) those
obligations under the Other Lease pertaining to the remaining portion of the
Other Premises and (ii) those obligations pertaining to the second (2nd) floor
portion of the Other Premises that are intended to survive termination
including, without limitation, Tenant's indemnity obligations and Tenant's
reconciliation obligations for operating expenses under the Other Lease, all of
which obligations Tenant acknowledges and agrees shall survive the expiration of
the Other Lease. No later than February 1, 2001, Tenant agrees to vacate,
surrender and deliver exclusive possession of the second (2nd) floor portion of
the Premises (the "OTHER PREMISES") covered under the Other Lease to the Other
Landlord in the condition required under the Other Lease and Tenant's failure to
do so shall constitute a holdover under the provisions of Paragraph 26 of the
Other Lease. The Other Landlord and Tenant acknowledge and agree that effective
as of February 1, 2001, the Other Lease (as it pertains to the first (1st) floor
portion of the Other Premises covered thereunder) shall be deemed converted into
a month-to-month tenancy, terminable by either party on thirty (30) days prior
written notice to the other, which month-to-month tenancy shall be subject to
all of the other terms and conditions of the Other Lease; provided, however,
that all of the terms and provisions of the Other Lease which vary based on the
rentable square footage of the Other Premises covered under the Other Lease
shall be deemed modified to reflect such reduction in the square footage of the
Other Premises during such month-to-month term of the Other Lease. Tenant shall,
within ten (10) days of Other Landlord's written request, execute a letter
confirming the terms and conditions of such month-to-month tenancy.
Notwithstanding anything above to the contrary, the Other Landlord and Tenant
acknowledge and agree that effective as of February 1, 2001, Tenant shall have
the right to cause the Other Lease to be terminated in its entirety (as to all
of the Other Premises); provided, however, that Tenant shall continue to be
liable under the Other Lease for those obligations under the Other Lease that
are intended to survive termination including, without limitation, Tenant's
indemnity obligations and Tenant's reconciliation obligations for operating
expenses under the Other Lease (and, all of which obligations Tenant
acknowledges and agrees will survive the expiration of the Other Lease). In the
event Tenant elects to cause such Other Lease to be terminated in its entirety
on February 1, 2001 then Tenant shall, as a condition precedent to such total
termination, provide Landlord with written notice on or before January 1, 2001.
Effective as of the date of the full execution and delivery of this Lease by
Landlord and Tenant, Tenant acknowledges and agrees that it shall provide
Landlord and Other Landlord with access to the Other Premises in order for
Landlord and/or the Other Landlord to install an elevator and ancillary
improvements in the Other Premises (collectively, the "WORK"). Tenant
acknowledges and agrees that Landlord's and/or the Other Landlord's performance
of the Work shall not entitle Tenant to any abatement of rent under the Other
Lease nor will it constitute a construction eviction of Tenant from the Other
Premises. Landlord and Other Landlord (by its execution below) acknowledges and
agrees that such Work shall be performed by Landlord and/or Other Landlord in a
manner so as to minimize any adverse interference with Tenant's business in the
Other Premises. Landlord agrees to reimburse to Tenant, up to Thirty Thousand
Dollars ($30,000.00) ("LANDLORD'S REIMBURSEMENT CAP") of the actual, documented
and reasonable moving costs incurred by Tenant in moving from the Other Premises
within thirty (30) days after Landlord's receipt of a reasonably particularized
invoice evidencing such costs.

33.2     ADDITIONAL MODIFICATIONS TO OTHER LEASE. By its execution below, the
Other Landlord and Tenant acknowledge and agree that effective as of the date of
the full execution and delivery of this Lease by Landlord and Tenant, Paragraph
56 of the Addendum to the Lease (pertaining to Tenant's renewal options) is
hereby deemed deleted in its entirety and shall be of no further force and
effect whatsoever. The Other Landlord and Tenant acknowledge and agree that the
modifications to the Other Lease set forth in this Section 33 shall survive the
expiration or earlier termination of this Lease.

"OTHER LANDLORD"              LBA-VF-II, LLC,
                              a California limited liability company

                              By: LBA, Inc., a California corporation, its agent


                                   By: /s/ Steve Layton
                                       -----------------------------------------
                                       Name: Steve Layton
                                             -----------------------------------
                                       Title: President
                                              ----------------------------------


                                      -29-
<PAGE>


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

"TENANT"                      OVERLAND DATA, INC.,
                              a California corporation


                              *By: /s/ Vern A. LoForti
                                   ---------------------------------------------
                                    Name:  Vernon A. LoForti
                                    Title: Vice President and Chief Financial
                                           Officer


                              *By: /s/ Scott McClendon
                                   ---------------------------------------------
                                    Name:  Scott McClendon
                                    Title: President and Chief Executive Officer

"LANDLORD"                    LBA-VFI ONE, LLC,
                              a California limited liability company


                              By: /s/ Phil A. Belling
                                  ----------------------------------------------
                                    Name: Phil A. Belling
                                          --------------------------------------
                                    Title: Authorized Signatory
                                           -------------------------------------


                              By: /s/ Steve Layton
                                  ----------------------------------------------
                                    Name: Steve Layton
                                          --------------------------------------
                                    Title: Secretary
                                           -------------------------------------


-------------------
*NOTE:
 ----
IF TENANT IS A CALIFORNIA CORPORATION, then one of the following alternative
requirements must be satisfied:

(A)      This Lease must be signed by two (2) officers of such corporation: one
         being the chairman of the board, the president or a vice president, AND
         the other being the secretary, an assistant secretary, the chief
         financial officer or an assistant treasurer. If one (1) individual is
         signing in two (2) of the foregoing capacities, that individual must
         sign twice; once as one officer and again as the other officer.
(B)      If there is only one (1) individual signing in two (2) capacities, or
         if the two (2) signatories do not satisfy the requirements of (A)
         above, then Tenant shall deliver to Landlord a certified copy of a
         corporate resolution in the form reasonably acceptable to Landlord
         authorizing the signatory(ies) to execute this Lease.

IF TENANT IS A CORPORATION INCORPORATED IN A STATE OTHER THAN CALIFORNIA, then
Tenant shall deliver to Landlord a certified copy of a corporate resolution in
the form reasonably acceptable to Landlord authorizing the signatory(ies) to
execute this Lease.


                                      -30-
<PAGE>


                                   EXHIBIT "A"


                        LEGAL DESCRIPTION OF THE PROPERTY

PARCEL A:

PARCELS 3 AND 4 OF MAP NO. 18532, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO
COUNTY, AUGUST 21, 2000 AS FILE NO. 2000-0444553 OF OFFICIAL RECORDS.

PARCEL B:

NON-EXCLUSIVE EASEMENTS FOR UTILITIES, GRADING AND SITE WORK, ENCROACHMENTS AND
DRAINAGE AS SHOWN AND DESCRIBED IN THE DECLARATION OF COVENANTS, CONDITIONS AND
RESTRICTIONS FOR SAN DIEGO SPECTRUM, RECORDED SEPTEMBER 16, 1999 AS FILE NO.
1999-0635988 OF OFFICIAL RECORDS.






                                  EXHIBIT "A"
                                      -1-
<PAGE>


                                   EXHIBIT "B"


                                    SITE PLAN






                             [GRAPHIC OF SITE PLAN]





                                  EXHIBIT "B"
                                      -1-
<PAGE>


                                   EXHIBIT "C"


                              WORK LETTER AGREEMENT

         This work letter ("WORK LETTER") is entered into as of this 18th day of
October, 2000, by and between LBA-VFI ONE, LLC, a California limited liability
company ("LANDLORD"), and OVERLAND DATA, INC., a California corporation
("TENANT").

                                R E C I T A L S :

         A.       Landlord and Tenant have entered into that certain
Build-to-Suit Single-Tenant Lease (Triple Net) (the "LEASE") dated as of the
date hereof, covering certain premises (the "PREMISES") more particularly
described in the Lease. This Work Letter is attached to the Lease as Exhibit
"C". The Lease is hereby incorporated into this Work Letter by this reference.
Capitalized terms not defined in this Work Letter shall have the meanings given
to such terms in the Lease.

         B.       In consideration of the mutual covenants contained in the
Lease and this Work Letter, Landlord and Tenant hereby agree as follows:

                               A G R E E M E N T :

         1.       DEFINITIONS. As used in this Work Letter and in the Lease, the
term "SHELL" shall mean those improvements set forth on the "Final Landlord
Plans" (defined in Section 5(b) of this Work Letter), which shall include the
buildings described in Section 1.3 of the Summary to the Lease (consisting of
the Office Building (containing approximately 55,000 to 60,000 rentable square
feet) and the R & D Building (containing approximately 80,000 to 85,000 rentable
square feet) (collectively, the "BUILDINGS"). As used in this Work Letter and in
the Lease, the term "TENANT IMPROVEMENTS" shall mean those improvements set
forth on the "Final Tenant Plans" (defined in Section 5(b) of this Work Letter).
As used in this Work Letter and in the Lease, "IMPROVEMENTS" shall mean the
Shell and the Tenant Improvements. The construction and installation of the
Improvements is sometimes referred to herein as the "WORK".

         2.       COMPLETION OF IMPROVEMENTS. Subject to the terms of the Lease
and this Work Letter and any "Tenant Delay" or "Force Majeure Delay" as provided
herein, Landlord shall use its commercially reasonable and diligent efforts to
cause the "Contractor" (defined in Section 7 of this Work Letter) to complete
the construction and installation of the Improvements in accordance with the
terms of this Work Letter.

         3.       DESIGNATION OF REPRESENTATIVES. With respect to the planning,
design and construction of the Improvements, Landlord hereby designates Steve
Briggs as "LANDLORD'S REPRESENTATIVE" and Tenant hereby designates Garry Smith
as "TENANT'S REPRESENTATIVE." Tenant hereby confirms that Tenant's
Representative has full authority to act on behalf of and to bind Tenant with
respect to all matters pertaining to the planning, design and construction of
the Improvements. Either party may change its designated representative upon
five (5) days prior written notice to the other party.

         4.       ARCHITECT SELECTION. An architectural firm selected by
Landlord and reasonably approved by Tenant ("LANDLORD'S ARCHITECT"), shall act
as the architect with respect to the design of the Improvements and Landlord
shall enter into a contract with Landlord's Architect for such services (the
"LANDLORD'S ARCHITECT CONTRACT"). Notwithstanding the foregoing, Tenant hereby
pre-approves Pacific Cornerstone Architects as Landlord's Architect. Landlord
reserves the right, at Landlord's sole cost and expense (and not as a part of
Improvement Costs), to retain a development consultant to assist Landlord in
performing its obligations under this Work Letter and under the Lease. Tenant
also reserves the right, at Tenant's cost which may be paid from the Allowance,
to retain the services of a construction manager to oversee the construction of
the Improvements on behalf of Tenant.

         5.       IMPROVEMENT PLANS.

                  (a)      PRELIMINARY PLANS.

                           (i)      PRELIMINARY PLANS FOR TENANT IMPROVEMENTS.
Within ten (10) days after the Effective Date, Tenant shall meet with Landlord's
Architect and provide Landlord's Architect with information regarding the
proposed specifications and proposed preliminary layout of the Tenant
Improvements, including designation of all proposed offices, rooms and other
partitioning, and their intended use, and equipment to be contained therein (the
"INFORMATION"). Landlord and Landlord's Architect shall, based on such
Information (subject to changes reasonably required by Landlord), prepare
preliminary plans ("PRELIMINARY TENANT PLANS") for the Tenant Improvements to be
installed in the Shell. Included in the Preliminary Tenant Plans will be the
civil, architectural and structural plans for the Tenant Improvements. Tenant
shall approve or reasonably disapprove the Preliminary Tenant Plans or any
revisions thereto within seven (7) business days after Landlord delivers the
Preliminary Tenant Plans or such revisions to Tenant; provided, however, that
Tenant may only disapprove the Preliminary Tenant Plans to the extent the same
are not (subject to changes reasonably required by Landlord) in substantial
conformance with the Information provided by Tenant to Landlord's Architect
("PRELIMINARY TENANT PLAN DESIGN PROBLEM"). Tenant's failure to disapprove the
Preliminary Tenant Plans (or any revisions thereto) for any Preliminary Tenant
Plan Design Problem by written notice to Landlord (which notice shall specify


                                  EXHIBIT "C"
                                      -1-
<PAGE>


in detail the reasonable reasons for Tenant's disapproval pertaining to any
Preliminary Tenant Plan Design Problem) within said seven (7) business day
period shall be deemed to constitute Tenant's approval of the Preliminary Tenant
Plans or such revisions. If Tenant provides Landlord with timely notice of its
disapproval of the Preliminary Tenant Plans, Landlord shall return the
Preliminary Tenant Plans to Landlord's Architect who shall make all necessary
revisions within seven (7) business days. This procedure shall be repeated until
Tenant ultimately approves the Preliminary Tenant Plans.

                           (ii)     PRELIMINARY PLANS FOR SHELL. Within thirty
(30) days after the Effective Date, Landlord shall use commercially reasonable
efforts to cause Landlord's Architect to prepare preliminary plans for the shell
of the Building and a site layout ("PRELIMINARY SHELL PLANS") which are
consistent with the Site Plan and "Base Building Profile" approved by the
parties and attached hereto as Schedule 1. Any change to the Base Building
Profile by Tenant shall be considered a Change Order and shall be processed in
accordance with Section 6 below. Included in the Preliminary Shell Plans will be
the civil, architectural and structural plans for the Shell and a preliminary
landscape plan for the Improvements. Within seven (7) business days of Tenant's
receipt of the Preliminary Shell Plans, Tenant shall either approve the
Preliminary Shell Plans (in its reasonable discretion) or specify the particular
changes which must be made to such document(s) for them to be reasonably
acceptable to Tenant; provided, however, that Tenant may only disapprove the
Preliminary Shell Plans to the extent the same are not (subject to changes
reasonably required by Landlord) in substantial conformance with Base Building
Profile and the Site Plan. Tenant's failure to notify Landlord in writing within
such seven (7) business day period of any changes Tenant desires to be made to
the Preliminary Shell Plans will be deemed to be Tenant's approval of the
Preliminary Shell Plans. If Tenant provides Landlord with timely notice of its
disapproval of the Preliminary Shell Plans, Landlord shall return the
Preliminary Shell Plans to Landlord's Architect who shall make all necessary
revisions within ten (10) business days. This procedure shall be repeated until
Tenant ultimately approves the Preliminary Tenant Plans.

                           (iii)    The Preliminary Tenant Plans and the
Preliminary Shell Plans are collectively referred to herein as the "PRELIMINARY
PLANS."

                  (b)      FINAL PLANS. Based on the Preliminary Tenant Plans,
Landlord shall cause Landlord's Architect to prepare the final plans and
specifications for the Tenant Improvements ("FINAL TENANT PLANS") which shall be
consistent with the Preliminary Plans, except for the changes, if any, mutually
agreed to be made thereto by the parties. Included in the Final Tenant Plans
will be the civil, architectural and structural plans for the Tenant
Improvements, and shall submit the same to Tenant for Tenant's approval. Tenant
shall approve or reasonably disapprove the Final Tenant Plans or any revisions
thereto within seven (7) business days after Landlord delivers the Final Tenant
Plans or any revisions thereto to Tenant; provided, however, that Tenant may
only disapprove the Final Tenant Plans to the extent the same are not (subject
to changes reasonably required by Landlord) in substantial conformance with the
Preliminary Tenant Plans ("FINAL TENANT PLAN DESIGN PROBLEM"). Tenant's failure
to reasonably disapprove the Final Tenant Plans or any revisions thereto by
written notice to Landlord (which notice shall specify in detail the reasonable
reasons for Tenant's disapproval pertaining to any Final Tenant Plan Design
Problem) within said seven (7) business day period shall be deemed to constitute
Tenant's approval of the Final Tenant Plans or such revisions. Based on the
Preliminary Shell Plans, Landlord shall cause Landlord's Architect to prepare
the final plans and specifications for the Shell ("FINAL LANDLORD PLANS") which
shall be consistent with the Preliminary Plans, except for the changes, if any,
mutually agreed to be made thereto by the parties. Included in the Final
Landlord Plans shall be the civil, architectural and structural plans for the
Shell and the landscape plan for the Improvements, and shall submit the same to
Tenant for Tenant's approval. Tenant shall approve or reasonably disapprove the
Final Landlord Plans or any revisions thereto within seven (7) business days
after Landlord delivers the Final Landlord Plans or any revisions thereto to
Tenant; provided, however, that Tenant may only disapprove the Final Landlord
Plans to the extent the same are not (subject to changes reasonably required by
Landlord) in substantial conformance with the Preliminary Shell Plans ("FINAL
LANDLORD PLAN DESIGN PROBLEM"). Tenant's failure to reasonably disapprove the
Final Landlord Plans or any revisions thereto by written notice to Landlord
(which notice shall specify in detail the reasonable reasons for Tenant's
disapproval pertaining to any Final Landlord Plan Design Problem) within said
seven (7) business day period shall be deemed to constitute Tenant's approval of
the Final Landlord Plans or such revisions. The Final Tenant Plans and the Final
Landlord Plans are hereinafter referred to as the "FINAL PLANS." When the Final
Plans have been approved by Tenant and Landlord, Landlord's Architect shall
submit the Final Plans to the appropriate governmental agency for plan checking
and the issuance of a building permit for the Improvements. Landlord's Architect
shall, subject to the reasonable approval of Landlord and Tenant, make any and
all minor changes and corrections the Final Plans required by any applicable
governmental entity to obtain a building permit for the Improvements.

                  (c)      WORK COST ESTIMATE. Prior to the commencement of
construction of any of the Tenant Improvements, Landlord shall submit to Tenant
a written estimate of the cost to complete the Tenant Improvements, which
written estimate will be based upon the Final Tenant Plans taking into account
any modifications which may be required to reflect changes in the Final Tenant
Plans required by the appropriate governmental authorities in connection with
the issuance of a building permit (the "WORK COST ESTIMATE"). Tenant will either
approve the Work Cost Estimate, or disapprove specific items, and submit to
Landlord revisions to the Final Tenant Plans. Submission and approval of the
Work Cost Estimate will proceed in accordance with the work schedule to be
provided by Landlord. Upon Tenant's approval of the Work Cost Estimate (the
"WORK COST STATEMENT"), Landlord will have the right to purchase materials and
to commence the construction of the items included in the Work Cost Statement.
If the total costs reflected in the Work Cost Statement exceed the Allowance (as
defined in Section 9


                                  EXHIBIT "C"
                                      -2-
<PAGE>


below), Tenant shall pay such excess (the "TENANT'S CONTRIBUTION") directly to
the Contractor (as selected and defined Section 7 below) in accordance with the
following procedure: Upon Landlord's receipt of a monthly draw request from the
Contractor for the Improvements and Landlord's approval of such draw request,
Landlord shall forward such draw request to Tenant's Representative together
with Landlord's determination (calculated in the manner set forth below) of that
portion of Tenant's Contribution applicable to such draw request. The applicable
portion of Tenant's Contribution for each draw request shall be calculated as
the percentage which Tenant's Contribution bears to the total amount set forth
in the Work Cost Statement. Such monthly payments by Tenant shall, however, be
reduced to the extent of any retention provided in Landlord's construction
contract with the Contractor for the Improvements (which final retention shall
be payable by Tenant together with Landlord's payment of such final retention).
Landlord will give Tenant periodic reports (not less than monthly) on estimated
and actual Work Costs incurred and Landlord will make Landlord's books and
records concerning the Work Costs reasonably available for review by Tenant
during the course of construction.

                  (d)      NO REPRESENTATIONS. Notwithstanding anything to the
contrary contained in the Lease or herein, Landlord's participation in the
preparation of the Preliminary Plans, the Final Plans, the cost estimates for
the Improvements and the construction thereof shall not constitute any
representation or warranty, express or implied, that the Improvements, if built
in accordance with the Preliminary Plans and/or the Final Plans, will be
suitable for Tenant's intended purpose. Tenant acknowledges and agrees that the
Improvements are intended for use by Tenant and the specifications and design
requirements for such Improvements are not within the special knowledge or
experience of Landlord. Landlord's sole obligation shall be to arrange the
construction of the Improvements in accordance with the requirements of the
Final Plans; and any additional costs or expense required for the modification
thereof to more adequately meet Tenant's use, whether during or after Landlord's
construction thereof, shall be borne entirely by Tenant except as otherwise
provided in this Work Letter. Notwithstanding the foregoing, Landlord agrees to
assign to Tenant the benefit of all construction warranties pertaining to the
Tenant Improvements to the extent that they do not relate to structural or other
portions (if any) of the Improvements that Landlord is expressly required to
maintain and repair under the Lease.

         6.       CHANGE ORDERS.

                  (a)      PROCESSING AND COST OF CHANGE ORDERS. After the
parties approve the Final Plans, a building permit for the Improvements is
issued and construction of the Improvements has commenced, any further changes
to the Final Plans and/or the Improvements requested by Tenant shall require the
prior written approval of Landlord (not to be unreasonably withheld or delayed).
If Tenant desires any change in the Final Plans relative to the Tenant
Improvements which is reasonable and practical taking into consideration
factors, including, without limitation, the stage of completion of the
construction, the cost of the proposed change, the availability of materials and
equipment required to perform the change, and the extent of any delay in
Substantial Completion which may result from the change (which shall be
reasonably determined by Landlord's Architect and the Contractor), such changes
may only be requested by the delivery to Landlord by Tenant of a proposed
written "Change Order" specifically setting forth the requested change. Landlord
shall have five (5) business days from the receipt of the proposed Change Order
to provide Tenant with Landlord's disapproval of the proposed change stating the
reason(s) for such disapproval, or if Landlord approves the proposed change, the
following items: (i) a summary of any increase (or decrease) in the cost caused
by such change (the "CHANGE ORDER COST"), (ii) a statement of the number of days
of any delay estimated to be caused by such proposed change, if any (the "CHANGE
ORDER DELAY"), and (iii) a statement of the cost of the Change Order Delay (the
"CHANGE ORDER DELAY EXPENSE"), which Change Order Delay Expense shall be the
product of the actual number of days of delay multiplied by the estimated daily
Monthly Rent rate. Tenant shall then have three (3) business days to approve the
Change Order Cost, the Change Order Delay and the Change Order Delay Expense. If
Tenant approves these items, Tenant shall pay the Change Order Cost directly to
the Contractor for the cost of the Change Order as such increased costs are
incurred and invoiced on a monthly basis from the Contractor as a part of the
Contractor's draw request. If Tenant fails to respond to Landlord within said
three (3) business day period, the Change Order Cost, the Change Order Delay and
the Change Order Delay Expense shall be deemed disapproved by Tenant and
Landlord shall have no further obligation to perform any work set forth in the
proposed Change Order. The Change Order Cost shall include all costs associated
with the Change Order, including, without limitation, actual and documented
architectural fees, engineering fees and construction costs attributable to such
Change Order, as reasonably determined by the Landlord's Architect and the
Contractor (defined in Section 7), respectively. The Change Order Delay shall
include all delays actually caused by the Change Order, including, without
limitation, all design and construction delays, as reasonably determined by the
Landlord's Architect and the Contractor (as defined in Section 7 below),
respectively. Within thirty (30) days of Substantial Completion of the
Improvements, Landlord shall provide Tenant with a reasonably detailed statement
setting forth the cumulative total of any Change Order Delay Expense actually
incurred as a result of any additive or deductive Change Orders requested by
Tenant throughout the course of construction of the Improvements. Tenant shall
then have five (5) business days to approve the Change Order Delay Expense. If
Tenant approves these items, Tenant shall pay to Landlord the Change Order Delay
Expense within five (5) business days after Tenant's approval thereof. Despite
anything in this Work Letter to the contrary, under no circumstances shall
Tenant incur any Change Order Cost or Change Order Delay Expense as a result of
Changes to the Final Plans requested by Landlord or changes required by any
governmental authorities as a result of the failure of the Final Plans or the
construction of the Improvements to comply with applicable building codes and
regulations and accordingly, if any change to the Final Plans requested by
Landlord shall require changes in the Improvements, the increased cost of the
changes to the Improvements shall be made at Landlord's expense.


                                  EXHIBIT "C"
                                      -3-
<PAGE>


         7.       SELECTION OF CONTRACTOR. On or before completion of the Final
Plans, Landlord shall select a general contractor for the construction of the
Improvements in accordance with the following procedures: If Landlord has not
done so prior to the completion of the Final Plans, then within five (5)
business days from the date of completion of the Final Plans, Landlord shall
submit to Tenant a proposed "bid list" to the following contractors: DPR
Construction, Roel Construction, Reno Contracting and RJ Petty and/or such other
contractors who have substantial experience in the construction of comparable
first-class build-to-suit facilities in the San Diego market area) which
Landlord intends to negotiate with for the construction of the Improvements.
Tenant shall have a period of five (5) business days to approve any additions to
the bid list. Tenant's failure to approve or disapprove Landlord's revised bid
list within such five (5) business day period shall constitute Tenant's approval
of Landlord's bid list. Once Landlord and Tenant have approved (or shall be
deemed to have approved) the bid list, Landlord shall solicit qualified bids
from the approved contractors. Each such contractor shall submit a sealed, fixed
price or guaranteed maximum contract bid (on a bid form approved by Landlord and
Tenant) to construct the Improvements. Each contractor shall be notified in the
bid package of the time schedule for construction of the Improvements. The bids
shall be submitted promptly to Landlord's Representative and a reconciliation
shall be performed by Landlord's Representative (in the presence of Tenant's
Representative) to adjust inconsistent or incorrect assumptions so that a
like-kind comparison can be made and a responsible and qualified low bidder
determined by the parties. Tenant's Representative and construction consultant,
if any, shall be entitled to participate in the line item review and negotiation
of the bids so as to assist Landlord in achieving the lowest responsible
qualified bid. The selected contractor shall be referred to herein as the
"CONTRACTOR." The general contractor shall only be entitled to use
subcontractors reasonably approved by Landlord . Despite the foregoing Tenant
shall have the right to reasonably approve all subcontractors for all major
sub-trades such as the electrical, mechanical, plumbing and HVAC subcontractors
and the Contractor shall be required to competitively bid all major sub-trades
to at least three (3) responsible and qualified subcontractors. Landlord shall
require Contractor (and all subcontractors) to maintain customary and prudent
types and amounts of insurance with regard to the construction of the
Improvements, specifically including, without limitation, workers compensation
insurance and commercial general liability insurance. In addition, Landlord
shall maintain "Builder's All Risk" insurance in customary and prudent amounts
of insurance with regard to the construction of the Improvements.

         8.       CONSTRUCTION OF THE IMPROVEMENTS. Landlord shall enter into a
construction contract with the Contractor on a form reasonably acceptable to
Landlord ("CONSTRUCTION CONTRACT") for the construction and installation of the
Improvements in accordance with the Final Plans. Promptly following the
completion of the selection of the Contractor Landlord shall furnish Tenant's
Representative with a critical path schedule setting forth the projected
completion dates for the major components of the Improvements and showing the
deadlines for any actions required to be taken by Tenant (if any) during such
construction. Such critical path schedule shall be updated by Landlord and
Landlord shall use good faith efforts to provide such updated schedule to
Tenant's Representative every two (2) weeks during the course of construction
Tenant's Representative shall determine on behalf of Tenant that Landlord is
meeting its construction obligations hereunder. Subject to Landlord's and
Contractor's reasonable work-place safety requirements, Landlord and Contractor
shall use commercially reasonable efforts to give Tenant's Representative access
to the construction site at all reasonable times and shall upon request, provide
to Tenant's Representative, copies of all field inspections and copies of any
correspondence from any government agencies having jurisdiction over the
construction process.

         9.       PAYMENT FOR COST OF THE TENANT IMPROVEMENTS.

                  (a)      ALLOWANCE. Landlord hereby grants to Tenant (i) a
tenant improvement allowance for the work described on the Final Tenant Plans
for the Office Building of Thirty-Five Dollars ($35.00) per rentable square foot
in the Office Building (the "OFFICE BUILDING ALLOWANCE") and (ii) a tenant
improvement allowance for the work described in the Final Tenant Plans for the R
& D Building of Twenty Dollars ($20.00) per rentable square foot in the R & D
Building (the "R & D BUILDING ALLOWANCE"). The Office Building Allowance and the
R & D Building Allowance, together with the Additional Construction Allowance
(as defined below), are collectively referred to herein as the "ALLOWANCE". The
Allowance is to be used only for the following costs approved by Landlord:

                           (i) Payment of the cost of preparing the Preliminary
                  Tenant Plans relative to the Tenant Improvements and the Final
                  Tenant Plans, including mechanical, electrical, plumbing and
                  structural drawings and of all other aspects necessary to
                  complete the Preliminary Tenant Plans and the Final Tenant
                  Plans.

                           (ii) The payment of plan check, permit and license
                  fees relating to construction of the Tenant Improvements.

                           (iii) Construction of the Tenant Improvements as
                  provided in the Final Tenant Plans, including without
                  limitation, the following:

                                    (aa) Installation within the Premises of all
                           partitioning, doors, floor coverings, ceilings, wall
                           coverings and painting and similar items;

                                    (bb) All electrical wiring, computer and
                           telecommunications cabling, lighting fixtures,
                           outlets and switches, and other electrical work
                           necessary for the Premises;


                                  EXHIBIT "C"
                                      -4-
<PAGE>


                                    (cc) The furnishing, installation and
                           screening of all HVAC units, duct work, terminal
                           boxes, diffusers and accessories necessary for the
                           heating, ventilation and air conditioning systems
                           within the Premises;

                                    (dd) Any additional improvements to the
                           Premises required for Tenant's use of the Premises
                           including, but not limited to, odor control, special
                           heating, ventilation and air conditioning, noise or
                           vibration control or other special systems or
                           improvements;

                                    (ee) All security systems, fire and life
                           safety control systems such as fire walls,
                           sprinklers, halon, fire alarms, including piping,
                           wiring and accessories, necessary for the Premises;

                                    (ff) All plumbing, fixtures, pipes and
                           accessories necessary for the Premises;

                                    (gg) Testing and inspection costs;

                                    (hh) Fees for the Contractor and Tenant's
                           construction manager (provided, however, that in no
                           event shall more than One and 50/100 Dollars ($1.50)
                           per rentable square foot of the Building constituting
                           the Allowance be used toward the fee of such
                           consultant) including, but not limited to, all fees
                           and costs attributable to the construction of the
                           Tenant Improvements including the Contractor's
                           general conditions associated with the construction
                           of the Tenant Improvements.

                                    (ii) The cost of delivering, installing and
                           purchasing Tenant's security systems, telephone
                           switch and communications equipment and cabling; and

                                    (jj) All other costs to be expended by
                           Landlord in connection with the construction of the
                           Tenant Improvements.

                  Except as specifically provided above, in no event will the
Allowance be used to pay for Tenant's moving expenses or for furniture,
artifacts, or any other item of personal property which is not affixed to the
Premises.

                  (b)      ADDITIONAL CONSTRUCTION ALLOWANCE FOR TENANT.
Landlord hereby grants to Tenant an additional construction allowance of Five
Dollars ($5.00) per rentable square foot in the Buildings (including the Office
Building and the R & D Building) (the "ADDITIONAL CONSTRUCTION ALLOWANCE");
provided, however, that notwithstanding anything in the Lease to the contrary,
in no event shall Landlord be obligated to grant any portion of the Additional
Construction Allowance to Tenant that will result in an increase in the Monthly
Amortization Rent (as defined in Section 1.6 of the Lease without reference to
the Additional Construction Allowance) in excess of One and 65/100 Dollars
($1.65) per rentable square foot in the Building (including the Office Building
and the R & D Building) per month. The Additional Construction Allowance shall
be available for Tenant to apply against the costs described in Section 9(a)
above only.

                  (c)      COSTS IN EXCESS OF ALLOWANCE. The cost of each item
referenced in Section 9(a) above shall be charged against the Allowance. If the
cost of the constructing the Tenant Improvements exceeds the Allowance, such
costs shall be paid for by Tenant as such costs are incurred and invoiced on a
monthly basis from the Contractor as a part of the Contractor's draw request.

                  (d)      UNUSED ALLOWANCE AMOUNTS. Any unused portion (if any)
of the Allowance upon completion of the Tenant Improvements shall be made
available to Tenant as a credit against any future Rent obligations of Tenant
under the Lease.

                  (e)      TENANT'S SPECIAL ITEMS. Notwithstanding anything in
the Lease and/or this Exhibit "C" to the contrary, Tenant acknowledges and
agrees that Landlord shall have the option to have Tenant contract directly with
Contractor and/or a contractor approved by Landlord (which approval shall not be
unreasonably withheld, conditioned or delayed) to perform and/or install the
following improvements in the Premises: telephone, computer and security cabling
and so-called "mission critical equipment" (collectively, the "TENANT SPECIAL
ITEMS"), the cost of which Tenant Special Items shall, subject to the
application of the Allowance (to the extent any such items are reflected in the
Final Tenant Plans and otherwise subject to the terms hereof)) be at Tenant's
sole cost and expense.

         10.      PAYMENT FOR COST OF THE SHELL. Landlord shall pay all costs of
designing and constructing the Shell as provided in the Final Landlord Plans.

         11.      EARLY ENTRY BY TENANT. Landlord shall use commercially
reasonable efforts to make the Premises reasonably available to Tenant prior to
Substantial Completion as provided in Section 2.2 of the Lease. Such early entry
by Tenant shall be subject to scheduling by Landlord and such rules and
regulations as Landlord may reasonably establish in order to minimize any
interference in Landlord's completion of the Improvements. If at any time such
entry shall cause or reasonably threaten a delay in


                                  EXHIBIT "C"
                                      -5-
<PAGE>


the Substantial Completion of the Improvements, Landlord may, following at least
one (1) business days written notice to Tenant (and if within such one (1)
business day period Tenant does not take steps to eliminate the cause of such
delay), terminate Tenant's right to such early entry; provided, however, that
once such cause of delay is cured by Tenant, Tenant's early entry rights shall,
subject to the terms and conditions of this Section 11, be reinstated by
Landlord. Prior to Tenant's entry, Tenant shall deliver evidence to Landlord
that Tenant has obtained the insurance required under the Lease. Tenant shall be
responsible for any damage to the Improvements caused by Tenant's entry.

         12.      SUBSTANTIAL COMPLETION; TARGET COMPLETION DATE.

                  (a)      SUBSTANTIAL COMPLETION. Substantial Completion" of
the Improvements shall be deemed to have occurred only when (1) the Premises has
been substantially completed pursuant to the Final Plans with the exception of
any "Punch List Items" as that term is defined below, such that Tenant can
conduct normal business operations from the Premises; all of the heating,
ventilating, air-conditioning ("HVAC"), and plumbing, life safety, mechanical
and/or electrical systems for each of the Buildings (collectively "BUILDING
SYSTEMS") are operational to the extent necessary to service the Premises; (2)
all required parking spaces and all exterior landscaping (including both
hardscape and softscapes) have been substantially completed; (3) Landlord has
tendered possession of the Premises to Tenant and Tenant has continuous and
commercially reasonable uninterrupted ingress and egress to the Buildings and
access to the Premises is available to Tenant; (4) Landlord files or causes to
be filed with the City in which the Premises are located (if required) and
delivers to Tenant an architect's notice of substantial completion, or similar
written notice that the Improvements are Substantially Complete, and (5) a
certificate of occupancy (or a reasonably substantial equivalent such as a
signoff from a building inspector or a temporary certificate of occupancy) is
issued for the Premises.

                  (b)      TARGET COMPLETION DATE. The parties estimate that
Substantial Completion will be achieved on or before February 1, 2002 (the
"TARGET COMPLETION DATE"). Landlord agrees to use its commercially reasonable
efforts to cause the Improvements to be substantially completed on or before the
Target Completion Date. If there is any delay in the Substantial Completion of
the Improvements beyond the Target Completion Date and such delay results from a
Tenant Delay, then the Commencement Date shall be accelerated by the number of
days of delay caused by the Tenant Delay(s).

         13.      TENANT DELAYS; FORCE MAJEURE DELAYS.

                  (a)      TENANT DELAYS. As used herein, "TENANT DELAYS" means
any actual and documented delay in the completion of the Improvements resulting
from any or all of the following: (1) Tenant's failure to timely perform any of
its obligations pursuant to this Work Letter, including any failure to complete,
on or before the due date therefor (or in any subsequently revised schedule),
any action item which is Tenant's responsibility pursuant to this Work Letter,
including Tenant's failure to grant approvals and/or make payments within the
time frames described herein; (2) Tenant's requested modifications to the
Preliminary Plans or any Tenant-initiated Change Orders, if such changes result
in an actual delay in Substantial Completion; (3) Tenant's request for
materials, finishes, or installations which are not readily available, (4) any
delay in any way whatsoever arising from Tenant's right to conduct "Inspections"
under Section 14 below, (5) Change Order Delays, or (6) any other act or failure
to act by Tenant, Tenant's Representative, Tenant's employees, agents,
independent contractors, consultants and/or any other person performing or
required to perform services on behalf of Tenant, including but not limited to,
interference with Landlord, or its contractors, during Tenant's early entry
under Section 2.2 of the Lease which results in an actual delay in Substantial
Completion of the Improvements. Despite the foregoing, no Tenant Delay shall be
deemed to have occurred until Landlord has given written notice to Tenant
specifying the action or inaction which Landlord contends constitutes a Tenant
Delay. Except as provided herein to the contrary, if such action or inaction is
not cured within one (1) business day after Tenant's receipt of such notice,
then a Tenant Delay shall be deemed to have occurred commencing as of the date
Tenant received such notice and continuing for the number of days the completion
of the Improvements was in fact delayed as a direct result of such action or
inaction.

                  (b)      FORCE MAJEURE DELAYS. "FORCE MAJEURE DELAYS" as used
herein means delays resulting from causes beyond the reasonable control of
Landlord or the Contractor, including, without limitation, any delay caused by
any action, inaction, order, ruling, moratorium, regulation, statute, condition
or other decision of any private party or governmental agency having
jurisdiction over any portion of the project, over the construction of the
Improvements or over any uses thereof, or by delays in inspections or in issuing
approvals by private parties or permits or approvals by governmental agencies,
or by fire, flood, inclement weather (including rain (and delays due to the
presence of mud)), strikes, lockouts or other labor or industrial disturbance
(whether or not on the part of agents or employees of either party hereto
engaged in the construction of the Improvements), civil disturbance, order of
any government, court or regulatory body claiming jurisdiction or otherwise, act
of public enemy, war, riot, sabotage, blockage, embargo, failure or inability to
secure materials, supplies or labor through ordinary sources by reason of
shortages or priority, discovery of hazardous or toxic materials, earthquake, or
other natural disaster, delays caused by any dispute resolution process, or any
cause whatsoever beyond the reasonable control (excluding financial inability)
of the party whose performance is required, or any of its contractors or other
representatives, whether or not similar to any of the causes hereinabove stated.
Landlord shall use commercially reasonable efforts to provide written notice to
Tenant of any Force Majeure Delays encountered by Landlord.


                                  EXHIBIT "C"
                                      -6-
<PAGE>


         14.      TENANT'S INSPECTION RIGHTS. Landlord shall schedule and attend
monthly progress meetings, walk-throughs and any other meetings with the
Landlord's Architect, the Contractor and Tenant to discuss the progress of the
construction of the Improvements ("MEETINGS"). Landlord shall give Tenant at
least twenty-four (24) hours prior notice (written or telephonic) of all such
Meetings. Tenant shall designate in writing the person or persons appointed by
Tenant to attend the Meetings and such designated party shall be entitled to be
present at and to participate in the discussions during all Meetings; but
Landlord may conduct the Meetings even if Tenant's appointees are not present.
In addition to the foregoing and to Tenant's early entry rights as provided in
Section 2.3 of the Lease, Tenant or its agents shall have the right at any and
all reasonable times to conduct inspections of work in progress ("INSPECTIONS")
for the purpose of reviewing whether the Improvements are being constructed in
accordance with the Final Plans, as amended by any approved Change Orders or
other agreed upon changes. Tenant agrees to protect, hold harmless and indemnify
Landlord from all claims, demands, costs and liabilities (including reasonable
attorneys' fees) arising from Tenant's or Tenant's agents entry onto the Site
for the purpose of conducting Inspections.

         15.      WALK-THROUGH AND PUNCH LIST. No earlier than five (5) days
prior to the estimated date of Substantial Completion of the Improvements,
Tenant's Representative, Landlord's Representative, the Contractor and Architect
shall jointly conduct a walk-through of the Improvements and shall jointly
prepare a punch list ("PUNCH LIST") of items needing additional work ("PUNCH
LIST ITEMS"); none of which shall take more than thirty (30) days to correct or
materially interfere with Tenant's use and occupancy of the Premises for the
Permitted Use; provided, however, the Punch List shall be limited to items which
are required by the Final Plans and any other changes agreed to by the parties.
Landlord shall diligently cause the Punch List Items to be completed by the
general contractor not later than thirty (30) days from the date of such walk-
through inspection. In addition to the inspection provided for above, no later
than nine (9) months following the Commencement Date, Tenant's Representative
and Landlord's Representative shall re-inspect the Premises and shall prepare a
final list of punch-list items which were not discovered during the
pre-Commencement Date inspection of the Premises; provided however, any items
damaged during Tenant's move in or occupancy shall be repaired or replaced by
Tenant at Tenant's sole cost and expense. Landlord shall cause the Contractor to
correct those punch-list items that Tenant Representative or Landlord's
Representative have identified within thirty (30) days after preparation of the
punch list or as soon thereafter as practicable.

         16.      MISCELLANEOUS CONSTRUCTION COVENANTS.

                  (a)      COORDINATION WITH LEASE. Nothing herein contained
shall be construed as (i) constituting Tenant as Landlord's agent for any
purpose whatsoever, or (ii) a waiver by Landlord or Tenant of any of the terms
or provisions of the Lease. Any default by either party with respect to any
portion of this Work Letter, shall be deemed a breach of the Lease for which
Landlord and Tenant shall have all the rights and remedies as in the case of a
breach of the Lease by the other party.

                  (b)      COOPERATION. Landlord and Tenant agree to cooperate
with one another and to cause their respective employees, agents and contractors
to cooperate with one another to coordinate any work being performed by Landlord
and/or Tenant under this Work Letter, and their respective employees, agents and
contractors so as to avoid unnecessary interference and delays with the
completion of the Work.

                  (c)      ASSIGNMENT OF WARRANTIES. At Tenant's option,
Landlord agrees to assign to Tenant or to otherwise use commercially reasonable
efforts to enforce all warranties (including any statutory obligations of the
contractor) received from all contractors and subcontractors involved in the
construction of the Premises. All such warranties shall provide that the portion
of the Improvements for which the Contractor (or subcontractor) is responsible
shall be free of defects in workmanship and materials for a period of at least
one (1) year from the date of completion and/or installation thereof ( such
period hereinafter referred to as the "WARRANTY PERIOD"). The Contractor (or
subcontractor) shall be responsible for the repair or replacement, without
additional charge, of all work done or required or furnished in accordance with
its contract that becomes defective within the later to occur of (i) the
Warranty Period; or (ii) one (1) year after the Commencement Date. All such
warranties or guaranties as to materials or workmanship with respect to the
Improvements shall be contained in the Construction Contract (and subcontracts)
and shall be written such that such warranties or guaranties shall inure to the
benefit of, and be enforceable directly by, both Landlord and Tenant. Landlord
agrees to provide to Tenant any assignment or other assurances which may be
necessary to effect such right of direct enforcement by Tenant.

                  (d)      CLEANING OF PREMISES. Upon Substantial Completion,
the general contractor shall thoroughly clean the Premises, including the
removal of all rubbish and debris.

                  (e)      RECORD SET OF PLANS. Promptly following Substantial
Completion of the Improvements, Landlord shall cause Architect to provide to
Tenant (at no additional charge to Tenant), a complete set of the Final Plans,
marked to show all changes made during the course of construction. In addition,
no later than thirty (30) days following Substantial Completion, Landlord shall
compile and deliver to Tenant, complete copies of all warranties, guaranties and
operating manuals and information relating to the Improvements and all equipment
and systems installed in the Premises as a part of the Improvements.


                                  EXHIBIT "C"
                                      -7-
<PAGE>


                  (f)      STAGING AREA/STORAGE SPACE. Not later than sixty (60)
days prior to the Target Commencement Date and subject to availability, as
determined by Landlord in Landlord's sole (but good faith) discretion, Tenant
shall have the right, without the obligation to pay Rent, to use at Tenant's
sole risk, any empty space in the Buildings designated by Landlord for the
purpose of storing and staging Tenant's property. Tenant shall provide all
insurance and any fencing or other protective facilities and Tenant shall not
interfere with the Substantial Completion of the Improvements. Any property
stored in the Premises by Tenant pursuant to this section shall be a Tenant's
sole risk and Tenant shall hold Landlord harmless and indemnify Landlord from
any and all loss, liability or cost arising out if or in connection with the use
of such storage space by Tenant, except to the extent caused by the gross
negligence or willful misconduct of Landlord.

         17.      NO REPRESENTATIONS. Landlord does not warrant that the
Building or any component thereof will be free of latent defects or that it will
not require maintenance and/or repair within any particular period of time,
except as expressly provided herein and in the Lease. Tenant acknowledges and
agrees that it shall rely solely on the warranty or guaranty, if any, from
Landlord's Contractor, or other material and/or service providers relative to
the proper design and construction of the Improvements or any component thereof.
Notwithstanding the foregoing, Landlord warrants and represents to Tenant that
the construction of the Improvements will be in compliance with all applicable
laws (including the ADA), applicable as of the date of the issuance of the
applicable building permit(s) for the Improvements (without regard, however, to
any alterations or other improvements to be constructed or installed by or on
behalf of Tenant in the Premises or Tenant's use of the Premises and based
solely on an unoccupied basis), and Landlord shall be responsible, at its sole
cost and expense which shall not be included as additional rent due and owing by
Tenant (except as otherwise permitted in the Lease), for correcting any such
non-compliance to the extent and as when required by applicable laws.

         18.      FINAL IMPROVEMENT COST RECONCILIATION/TENANT'S INSPECTION OF
BOOKS AND RECORDS. Landlord and Tenant acknowledge and agree that a component of
Monthly Rent payable by Tenant is based on the Improvement Costs incurred by
Landlord. Landlord and Tenant further acknowledge and agree that the Monthly
Rent payable by Tenant hereunder shall be initially determined by Landlord based
on Landlord's good faith determination of the Improvement Costs. Not later than
thirty (30) days following the Commencement Date, Landlord shall provide to
Tenant a preliminary reconciliation and preliminary summary of all Improvement
Costs (as defined in Section 1.6 (c) of the Summary) incurred by Landlord in
connection with the construction of the Improvements (the "PRELIMINARY
IMPROVEMENT COST SUMMARY") and shall provide Tenant with a reasonably detailed
and complete and final reconciliation and summary of Improvement Costs incurred
by Landlord in connection with the construction of the Improvements (the "FINAL
IMPROVEMENT COST SUMMARY") not later than one hundred twenty (120) days
following the Commencement Date. Landlord and Tenant acknowledge and agree that
the Monthly Rent (as initially determined by Landlord) may be subject to
adjustment by Landlord based on the Final Improvement Cost Summary and, upon
such adjustment (if any), Tenant agrees to execute (or re-execute) the Notice of
Lease Term Dates (in the form attached hereto as Exhibit "D"), which notice (or
revised notice) shall contain such adjusted Monthly Rent. Except for the cost of
any Change Orders approved by Tenant, the Final Improvement Cost Summary shall
be consistent with the final Work Cost Statement approved by Tenant as provided
in Section 5(c) above. In addition, Tenant shall have the right, at its option,
at any time within one (1) year after the Commencement Date, and upon at least
five (5) business days prior written notice to Landlord, to inspect and audit
Landlord's books and records relating to Landlord's expenditures in connection
with the construction of the Improvements. Landlord shall maintain complete and
accurate books and records in accordance with generally accepted accounting
principles of these expenditures for at least one (1) year after the
Commencement Date. Landlord shall make available to Tenant's representative or
auditor at the Premises within five (5) business days following Landlord's
notice requiring the audit, all books and records maintained by Landlord
pertaining to the construction and completion of the Improvements. In addition
to all other remedies which Tenant may have pursuant to the Lease, Tenant may
recover from Landlord the reasonable actual and documented cost of its audit if
the audit discloses that Landlord falsely reported to Tenant expenditures which
were not in fact made or falsely reported a material amount of any expenditure
or the aggregate expenditures for the Improvements.

         IN WITNESS WHEREOF, this Work Letter is executed as of the date first
written above.

"TENANT"                           OVERLAND DATA, INC.,
                                   a California corporation


                                   By: /s/ Vernon A. LoForti
                                       -----------------------------------------
                                         Name:  Vernon A. LoForti
                                         Title: Vice President and Chief
                                                Financial Officer


                                   *By: /s/ Scott McClendon
                                        ----------------------------------------
                                         Name:  Scott McClendon
                                         Title: President and Chief Executive
                                                Officer


                                  EXHIBIT "C"
                                      -8-
<PAGE>



"LANDLORD"                         LBA-VIF ONE, LLC,
                                   a California limited liability company


                                   By: /s/ Phil A. Belling
                                       -----------------------------------------
                                         Name: Phil A. Belling
                                               ---------------------------------
                                         Title: Authorized Signatory
                                                --------------------------------


                                   By: /s/ Steve Layton
                                       -----------------------------------------
                                         Name: Steve Layton
                                               ---------------------------------
                                         Title: Secretary
                                                --------------------------------


                                  EXHIBIT "C"
                                      -9-
<PAGE>


                                   SCHEDULE 1


                              BASE BUILDING PROFILE

-        Concrete tilt up exterior walls with windows.

-        New glass curtain wall at front of building entrance and corners per
         elevations. Hercalite entry doors, and entry canopy.

-        All "wet" utilities are to be from point of connection to inside the
         Building only, all distribution, rough-in, and fixtures to be offset
         from the Allowance (or otherwise at Tenant's sole cost and expense).

-        All required exiting stairs are to be metal pan / concrete filled
         stairs with metal handrails. All walls and painting to be offset from
         the Allowance (or otherwise at Tenant's sole cost and expense).

-        Roofing is to be built up roofing with a cap sheet. Provide a 20 N-D-L
         roof warranty.

-        All elevators, including elevator cab finishes and elevator pits, are
         included in the Shell.

-        Electrical service to be sized as 277/480 Volt, 4000 Amp services to
         both buildings. Shell work to include all site work underground pull
         section, and main switchgear in the buildings. All distribution to be
         offset from the Allowance (or otherwise at Tenant's sole cost and
         expense).

-        Fire Sprinklers are to be provided for the Shell only, and sized for
         build out of Tenant Improvements. All Tenant Improvement required
         modifications to be offset from the Allowance (or otherwise at Tenant's
         sole cost and expense).

-        Fire Alarm will be a code required system to accommodate the Shell with
         expansion capability for Tenant Improvements. All Tenant Improvements
         related additional devices and general system upgrades to be offset
         from the Allowance (or otherwise at Tenant's sole cost and expense).

-        All site work including parking lot, truck ramps, sidewalks,
         landscaping, and site lighting in shell. Any mechanical yards,
         pedestrian bridges, or sport courts to be offset from the Allowance (or
         otherwise at Tenant's sole cost and expense).

-        Conduit for fiber optic and other communications cabling shall be
         included in the Shell.


                                   SCHEDULE 1
                                      -1-
<PAGE>


                                   EXHIBIT "D"


                    SAMPLE FORM OF NOTICE OF LEASE TERM DATES

To:
   --------------------------------------------------

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

Re:      Lease dated ________________________, 2000 between LBA-VFI ONE, LLC, a
California limited liability company, Landlord, and OVERLAND DATA, INC., a
California corporation, Tenant, concerning premises located at
______________________________ ("PREMISES").

Gentlemen:

In accordance with the above-referenced Lease, we wish to advise and/or confirm
as follows:

1.       That the Premises have been accepted by Tenant in accordance with the
Lease.

2.       That Tenant has accepted and is in possession of the Premises, and

acknowledges that under the provisions of the Lease, the Term of the Lease
expires on ________________ (subject to earlier termination as provided in the
Lease), with one (1) option to renew for five (5) years, and commenced upon
__________________.

3.       That in accordance with the Lease, rental payment has commenced.

4.       If the Commencement Date of the Lease is other than the first day of
the month, the first billing will contain a pro rata adjustment. Each billing
thereafter, with the exception of the final billing, shall be for the full
amount of the monthly installment as provided for in the Lease.

5.       Monthly Rent is due and payable in advance on the first day of each and
every month during the Term of the Lease. Your rent checks should be made
payable to _________________________ at ____________________________.

6.       The exact number of rentable square feet within the Premises is
________ rentable square feet.

7.       Tenant's address for notices under the Lease shall be:

                          Overland Data, Inc.

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

                          ---------------------------
                          Attn:  Michael Gawarecki, Vice-President Operations
                          Telephone:
                                      -----------------------
                          Facsimile:
                                      -----------------------

AGREED AND ACCEPTED:

"TENANT"                          OVERLAND DATA, INC.,
                                  a California corporation


                                  By:
                                      ------------------------------------------
                                        Name:  Vernon A. LoForti
                                        Title: Vice President and Chief
                                               Financial Officer


                                  *By:
                                      ------------------------------------------
                                        Name:  Scott McClendon
                                        Title: President and Chief Executive
                                               Officer

"LANDLORD"                        LBA-VFI ONE, LLC,
                                  a California limited liability company

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

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


                         SAMPLE ONLY [NOT FOR EXECUTION]



                                  EXHIBIT "D"
                                      -1-
<PAGE>


                                   EXHIBIT "E"


                           ENVIRONMENTAL QUESTIONNAIRE

The purpose of this form is to obtain information regarding the use or proposed
use of hazardous materials at the premises. Prospective tenants should answer
the questions in light of their proposed operations at the premises. Existing
tenants should answer the questions as they relate to ongoing operations at 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.

Your cooperation in this matter is appreciated.

1.       GENERAL INFORMATION

         Name of Tenant:                                                       .
                          -----------------------------------------------------

         Check the Applicable Status:  Prospective Tenant _____
                                       Existing Tenant _____

         Contact Person and Title:
                                    -------------------------------------------

         Telephone Number:  (_____) ________________________

         Address of Leased Premises:
                                      ------------------------------------------

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

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

2.       STORAGE OF HAZARDOUS MATERIALS

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

                  Wastes                Yes _____              No _____

                  Chemical Products     Yes _____              No _____

         2.2      Attach a list of 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., 55-gallon drums on
                  concrete pad).

3.       STORAGE TANKS AND SUMPS

         3.1      Is any above or below ground storage of gasoline, diesel or
                  other hazardous substances in tanks or sumps proposed or
                  currently conducted at the premises?

                  Yes ______        No _____

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

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

         3.2      Have any of the tanks or sumps been inspected or tested for
                  leakage?

                  Yes ______        No _____

                  If so, attach the results.

         3.3      Have any spills or leaks occurred from such tanks or sumps?

                  Yes ______        No _____

                  If so, describe.

         3.4      Were any regulatory agencies notified of the spill or leak?

                  Yes ______        No _____

                  If so, attach copies of any spill reports filed, any clearance
                  letters or other correspondence from regulatory agencies
                  relating to the spill or leak.


                                  EXHIBIT "E"
                                      -1-
<PAGE>


         3.5      Have any underground storage tanks or sumps been taken out of
                  service or removed?

                  Yes ______        No _____

                  If yes, attach copies of any closure permits and clearance
                  obtained from regulatory agencies relating to closure and
                  removal of such tanks.
4.       SPILLS

         4.1      During the past year, have any spills occurred at the
                  premises?

                  Yes ______        No _____

                  If yes, please describe the location of the spill.

         4.2      Were any agencies notified in connection with such spills?

                  Yes ______        No _____

                  If yes, 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 _____

                  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.       WASTE MANAGEMENT

         5.1      Has your company been issued an EPA Hazardous Waste Generator
                  I.D. Number?

                  Yes ______        No _____

         5.2      Has your company filed a biennial report as a hazardous waste
                  generator?

                  Yes ______        No _____

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

         5.3      Attach a list of the hazardous wastes, if any, generated or to
                  be generated at the premises, its hazard class and the
                  quantity generated on a monthly basis.

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

                  _____    On-site treatment or recovery

                  _____    Discharged to sewer

                  _____    Transported and disposed of off-site

                  _____    Incinerator

         5.5      Indicate the name of the person(s) responsible for maintaining
                  copies of hazardous waste manifests completed for off-site
                  shipments of hazardous waste.

         5.6      Is any treatment of processing of hazardous wastes currently
                  conducted or proposed to be conducted at the premises:

                  Yes ______        No _____

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

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

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


                                  EXHIBIT "E"
                                      -2-
<PAGE>


6.       WASTEWATER TREATMENT/DISCHARGE

         6.1      Do you discharge wastewater to:

                  _____  storm drain?         _____  sewer?

                  _____  surface water?       _____  no industrial discharge

         6.2      Is your wastewater treated before discharge?

                  Yes ______        No _____

                  If yes, describe the type of treatment conducted.

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

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

7.       AIR DISCHARGES

         7.1      Do you have any filtration systems or stacks that discharge
                  into the air?

                  Yes ______        No _____

         7.2      Do you operate any of the following types of equipment or any
                  other equipment requiring an air emissions permit?

                  _____    Spray booth

                  _____    Dip tank

                  _____    Drying oven

                  _____    Incinerator

                  _____    Other (please describe)

                  _____ No equipment requiring air permits

         7.3      Are air emissions from your operations monitored?

                  Yes ______        No _____

                  If so, indicate the frequency of monitoring and a description
                  of the monitoring results.

         7.4      Attach copies of any air emissions permits pertaining to your
                  operations at the premises.

8.       HAZARDOUS MATERIALS DISCLOSURES

         8.1      Does your company handle hazardous materials in a quantity
                  equal to or exceeding an aggregate of 500 pounds, 55 gallons,
                  or 200 cubic feet per month?

                  Yes ______        No _____

         8.2      Has your company prepared a hazardous materials management
                  plan pursuant to any applicable requirements of a local fire
                  department or governmental agency?

                  Yes ______        No _____

                  If so, attach a copy of the business plan.

         8.3      Has your company adopted any voluntary environmental, health
                  or safety program?

                  Yes _____         No _____

                  If so, attach a copy of the program. No formal program. We
                  recycle paper, aluminum cans, and scrap aluminum.


                                  EXHIBIT "E"
                                      -3-
<PAGE>


9.       ENFORCEMENT ACTIONS, COMPLAINTS

         9.1      Has your company ever been subject to any agency enforcement
                  actions, administrative orders, or consent decrees?

                  Yes ______        No _____

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

         9.2      Has your company ever received requests for information,
                  notice or demand letters, or any other inquiries regarding its
                  operations?

                  Yes ______        No _____

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

                  Yes ______        No _____

         9.4      Has an environmental audit ever been conducted at your
                  company's current facility?

                  Yes ______        No _____

                  If so, identify who conducted the audit and when it was
                  conducted.

The undersigned represents that the foregoing is true and correct in all
material respects.

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

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


                                  EXHIBIT "E"
                                      -4-
<PAGE>


                                   EXHIBIT "F"


                   SAMPLE FORM OF TENANT ESTOPPEL CERTIFICATE

The undersigned ("TENANT") hereby certifies to LBA-VFI ONE, LLC, a California
limited liability company ("Landlord"), and ____________________________, as
follows:

1.       Attached hereto is a true, correct and complete copy of that certain
Lease dated _______________________, 2000 between Landlord and Tenant (the
"Lease"), which demises Premises which are located at . The Lease is now in full
force and effect and has not been amended, modified or supplemented, except as
set forth in Section 6 below.

2.       The term of the Lease commenced on ________________, 2000.

3.       The term of the Lease is currently scheduled to expire on
________________, ____.

4.       Tenant has no option to renew or extend the Term of the Lease except:
________________________________.

5.       Tenant has no preferential right to purchase the Premises.

6.       The Lease has: (Initial One)

( )      not been amended, modified, supplemented, extended, renewed or
assigned.

( )      been amended, modified, supplemented, extended, renewed or assigned
by the following described agreements, copies of which are attached hereto:

---------------------------------------------------------------.

7.       Tenant has accepted and is now in possession of the Premises and has
not sublet, assigned or encumbered the Lease, the Premises or any portion
thereof except as follows: ____________________.

8.       The current Monthly Rent is $______________.

9.       The amount of Security Deposit (if any) is $________________. No other
security deposits have been made.

10.      All rental payments payable by Tenant have been paid in full as of the
date hereof. No rent under the Lease has been paid for more than thirty (30)
days in advance of its due date.

11.      All work required to be performed by Landlord under the Lease has been
completed and has been accepted by Tenant, and all tenant improvement allowances
have been paid in full.

12.      To the best of Tenant's knowledge, as of the date hereof, there are no
defaults on the part of Landlord or Tenant under the Lease.

13.      Tenant has no defense as to its obligations under the Lease and claims
no set-off or counterclaim against Landlord.

14.      Tenant has no right to any concession (rental or otherwise) or similar
compensation in connection with renting the space it occupies, except as
expressly provided in the Lease.

15.      All insurance required of Tenant under the Lease has been provided by
Tenant and all premiums have been paid.

16.      There has not been filed by or against Tenant a petition in bankruptcy,
voluntary or otherwise, any assignment for the benefit of creditors, any
petition seeking reorganization or arrangement under the bankruptcy laws of the
United States or any state thereof, or any other action brought pursuant to such
bankruptcy laws with respect to Tenant.

17.      Tenant pays rent due Landlord under the Lease to Landlord and does not
have any knowledge of any other person who has any right to such rents by
collateral assignment or otherwise.


                                  EXHIBIT "F"
                                      -1-
<PAGE>


The foregoing certification is made with the knowledge that
________________________ is about to [fund a loan to Landlord or purchase the
Premises from Landlord], and that ________________________ is relying upon the
representations herein made in [funding such loan or purchasing the Premises].

Dated:  ________________, 2000.

"TENANT"

OVERLAND DATA, INC.,
a California corporation


By:
    ----------------------------------------------------
      Name:  Vernon A. LoForti
      Title:  Vice President and Chief Financial Officer


*By:
     ---------------------------------------------------
      Name:  Scott McClendon
      Title:  President and Chief Executive Officer

                         SAMPLE ONLY (NOT FOR EXECUTION)




                                  EXHIBITI "F"
                                      -2-
<PAGE>


                                   EXHIBIT "G"


                                LETTER OF CREDIT

LBA/VFI One, LLC
4320 La Jolla Village Drive, Suite 200
San Diego, California  92122
Attention:  David C. Thomas

Ladies and Gentlemen:

         We hereby establish in your favor, for the account of Overland Data,
Inc., a California corporation ("Applicant"), our Irrevocable Letter of Credit
and authorize you to draw on us at sight the aggregate amount of One Million
Five Hundred Thousand Dollars ($1,500,000.00) ("Stated Amount").

         Funds under this Letter of Credit are available to LBA/VFI One, LLC, a
California limited liability company (the "Beneficiary") as follows:

         Any and all of the sums hereunder may be drawn down at any time and
from time to time from and after the date hereof by Beneficiary when accompanied
by this Letter of Credit and a written certification signed by an authorized
signatory of Beneficiary certifying that such sums are due and owing to
Beneficiary pursuant to that certain Build-To-Suit Single-Tenant Lease dated
October __, 2000 ("Lease") by and between Beneficiary, as Landlord, and
Applicant, as Tenant, together with a notarized certification by any such
individual representing that such individual is authorized by Beneficiary to
take such action on behalf of Beneficiary. The sums drawn by Beneficiary under
this Letter of Credit shall be payable upon demand without necessity of notice
to the Applicant. Partial drawings shall be permitted.

         This Letter of Credit is transferable (and/or assigned by Beneficiary
to a third party) in its entirety. Should a transfer be desired, such transfer
will be subject to the return to us of this Letter of Credit, together with
written instructions.

         The amount of each draft must be endorsed on the reverse hereof by the
negotiating bank. We hereby agree that this Letter of Credit shall be duly
honored upon presentation and delivery of the certification specified above.

         This Letter of Credit shall expire on _________________.

         Notwithstanding the above expiration of this Letter of Credit, the term
of this Letter of Credit shall be automatically renewed for successive,
additional one (1) year periods unless, at least thirty (30) days prior to any
such date of expiration, the undersigned shall give written notice to
Beneficiary, by certified mail, return receipt requested and at the address set
forth above or at such other address as may be given to the undersigned by
Beneficiary, that this Letter of Credit will not be renewed.

         This Letter of Credit is governed by the Uniform Customs and Practice
for Documentary Credits (1993 Revision), International Chamber of Commerce
Publication 500.

                                      Very truly yours,

                                      (Name of Issuing Bank)

                                      By:
                                         ---------------------------------------


                                  EXHIBIT "G"
                                      -1-
<PAGE>


                                   EXHIBIT "H"


                           FORM OF MEMORANDUM OF LEASE

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Procopio, Cory, Hargreaves
         & Savitch LLP
530 B Street, Suite 2100
San Diego, CA 92101-4469
Attention:  Eric B. Shwisberg, Esq.

--------------------------------------------------------------------------------
                                                (Space Above For Recorder's Use)



                               MEMORANDUM OF LEASE

         THIS MEMORANDUM OF LEASE ("MEMORANDUM") is dated the 12th day of
October, 2000, by and between LBA-VIF ONE, LLC, a California limited liability
company ("LANDLORD"), and OVERLAND DATA, INC., a California corporation
("TENANT").


                                R E C I T A L S :
                                - - - - - - - -


         A.       Landlord and Tenant entered into that certain Built-To-Suit
Single-Tenant Lease (Triple-Net) dated as of October 12, 2000 (the "LEASE"),
with respect to that certain real property (the "PROPERTY") located in the City
of San Diego, County of San Diego, State of California, all as more particularly
described in Exhibit A attached thereto and made in part hereof, together with
those certain premises to be constructed thereon by Landlord to consist of a two
(2) story building containing approximately 55,000 to 60,000 rentable square
feet and a one (1) story building containing approximately 80,000 to 85,000
rentable square feet (collectively the "PREMISES").

         B.       Landlord and Tenant wish to record a Memorandum of the Lease
confirming the existence of the Lease and certain matters pertaining thereto.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

         1.       LEASE. In consideration of the covenants and agreements
contained in the Lease, Landlord does hereby lease to Tenant the Premises more
particularly described in the Lease. As of the date hereof, the Lease is
currently in full force and effect and has not been modified or amended in any
respect whatsoever.

         2.       TERM. The term of the Lease shall expire, unless extended
pursuant to the option available to Tenant in accordance with the terms of the
Lease, twelve (12) years after the "Commencement Date," as that term is defined
in Section 1.4 of the Summary of Basic Lease Information contained in the Lease.

         3.       OPTION. Tenant has one (1) option to extend the term of the
Lease for five (5) years on the terms and conditions set forth in Section 2.4 of
the Lease.

         4.       LEASE INCORPORATED. The purpose of this Memorandum is solely
to provide notice of the existence of the Lease. All of the terms, conditions
and covenants of the Lease are incorporated herein by this reference and are not
amended, modified or varied in any way by this Memorandum. The terms of the
Lease shall govern in the event of any conflict with this Memorandum.

         5.       TERMINATION OF LEASE. Upon the expiration or sooner
termination of the Lease, this Memorandum shall terminate and be of no further
force or effect and Tenant agrees to execute and deliver for recordation, a
quitclaim deed in favor of Landlord confirming that Tenant quitclaims all right,
title and interest in and to the Premises under the Lease.

         6.       COUNTERPARTS. This Memorandum may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute one and the same instrument.


                                  EXHIBIT "H"
                                      -1-
<PAGE>


         IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Lease as of the date first above written.

"TENANT"                         OVERLAND DATA, INC.,
                                 a California corporation


                                 By: /s/ Vernon A. LoForti
                                     -------------------------------------------
                                       Name:  Vernon A. LoForti
                                       Title: Vice President and Chief Financial
                                              Officerr


                                 By: /s/ Scot McClendon
                                     -------------------------------------------
                                       Name:  Scott McClendon
                                       Title: President and Chief Executive
                                              Officer

"LANDLORD"                       LBA-VIF ONE, LLC,
                                 a California limited liability company


                                 By: /s/ Phil A. Belling
                                     -------------------------------------------
                                       Name: Phil A. Belling
                                             -----------------------------------
                                       Title: Authorized Signatory
                                              ----------------------------------


                                 By: /s/ Steve Layton
                                     -------------------------------------------
                                       Name: Steve Layton
                                             -----------------------------------
                                       Title: Secretary
                                              ----------------------------------




STATE OF California                 )
                                    )ss.                             ss.
COUNTY OF San Diego                 )

         On October 12, 2000, before me, Jolene R. Fielding, a Notary Public in
and for said state, personally appeared Vernon A. LoForti (or proved to me on
the basis of satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument, the person, or
the entity upon behalf of which the person acted, executed the instrument.

         WITNESS my hand and official seal.

                                         /s/ Jolene R. Fielding
                                         ---------------------------------------
                                         Notary Public in and for said State








STATE OF California                 )
                                    )ss.                             ss.
COUNTY OF San Diego                 )

         On October 12, 2000, before me, Jolene R. Fielding, a Notary Public in
and for said state, personally appeared Scott McClendon, (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument, the person, or
the entity upon behalf of which the person acted, executed the instrument.

         WITNESS my hand and official seal.

                                         /s/ Jolene R. Fielding
                                         ---------------------------------------
                                         Notary Public in and for said State


                                  EXHIBIT "H"
                                      -2-
<PAGE>


STATE OF                            )
                                    )                                ss.
COUNTY OF Orange                    )

         On October 13, 2000, before me, Jane Armstrong, a Notary Public in and
for said state, personally appeared Phil A. Belling, personally known to me to
be the person whose name is subscribed to the within instrument and acknowledged
to me that he executed the same in his authorized capacity, and that by his
signature on the instrument, the person, or the entity upon behalf of which the
person acted, executed the instrument.

         WITNESS my hand and official seal.

                                         /s/ Jane Armstrong
                                         ---------------------------------------
                                         Notary Public in and for said State





STATE OF                            )
                                    )                                ss.
COUNTY OF Orange                    )

         On October 13, 2000, before me, Jane Armstrong, a Notary Public in and
for said state, personally appeared Steve Layton, personally known to me to be
the person whose name is subscribed to the within instrument and acknowledged to
me that he executed the same in his authorized capacity, and that by his
signature on the instrument, the person, or the entity upon behalf of which the
person acted, executed the instrument.

         WITNESS my hand and official seal.

                                         /s/ Jane Armstrong
                                         ---------------------------------------
                                         Notary Public in and for said State


                                  EXHIBIT "H"
                                      -3-
<PAGE>


                        EXHIBIT A TO MEMORANDUM OF LEASE


                        LEGAL DESCRIPTION OF THE PROPERTY





PARCEL A:

PARCELS 3 AND 4 OF MAP NO. 18532, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO
COUNTY, AUGUST 21, 2000 AS FILE NO. 2000-0444553 OF OFFICIAL RECORDS.

PARCEL B:

NON-EXCLUSIVE EASEMENTS FOR UTILITIES, GRADING AND SITE WORK, ENCROACHMENTS AND
DRAINAGE AS SHOWN AND DESCRIBED IN THE DECLARATION OF COVENANTS, CONDITIONS AND
RESTRICTIONS FOR SAN DIEGO SPECTRUM, RECORDED SEPTEMBER 16, 1999 AS FILE NO.
1999-0635988 OF OFFICIAL RECORDS.




                                  EXHIBIT A TO
                                   MEMORANDUM
                                    OF LEASE
                                      -1-