<PAGE>

                                                                    EXHIBIT 21A

                                  STANDARD FORM
                                    SUBLEASE

        This sublease ("Sublease") is made as of the 9th day of July, 1996, by
and between THE RAND CORPORATION, a California non-profit public benefit
corporation (hereinafter referred to as "Sublandlord") and Specialty
Laboratories, Inc., a California corporation (hereinafter referred to as
"Subtenant") with regard to the following facts:


                                    RECITALS

        A.      Sublandlord is the tenant ("Tenant") under that certain Office
Lease (the "Master Lease"), dated as of January 20, 1993, as amended by that
certain First Amendment to Office Lease dated as of February 8, 1993
(collectively, the "Master Lease"), with WATER GARDEN ASSOCIATES, a Delaware
limited partnership, as predecessor-in-interest to WATER GARDEN COMPANY L.L.C.,
a Delaware limited liability company (the "Landlord") (a copy of which Master
Lease is attached hereto as EXHIBIT A and by this reference made a part hereof)
concerning approximately 53,620 rentable square feet of office space (the
"Premises") located on the 5th and 6th floors of the South tower of the building
(the "Building") located at 1620 26th Street, Santa Monica, California, together
with certain other Print Facility Space.

        B.      Subtenant desires to sublease from Sublandlord a portion of the
Premises consisting of approximately 28,607 rentable square feet of space
consisting of the entire 5th floor (Suite 500S) (which portion shall be
hereafter referred to as the "Subleased Premises") more particularly set forth
on EXHIBIT B attached hereto, including, subject to the provisions of Paragraphs
18.6 and 18.9, the special equipment room shown as attached on EXHIBIT B (the
"Equipment Room"), and Sublandlord has agreed to sublease the Subleased Premises
to Subtenant upon the terms, covenants and conditions herein set forth. See
Paragraph 18.9 for additional provisions concerning the Subleased Premises.


                                    AGREEMENT

        In consideration of the mutual covenants contained herein, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

        1.      SUBLEASE. Sublandlord hereby subleases and demises to Subtenant
and Subtenant hereby hires and takes from Sublandlord the Subleased Premises.

        2.      TERM. The term of this Sublease shall commence on the last to
occur of (i) Sublandlord's receipt of Landlord's approval of this Sublease, (ii)
Sublandlord's delivery of the Subleased Premises to Subtenant in accordance with
Paragraph 7.7, or (iii) August 1, 1996; or earlier upon mutual written agreement
of the parties, and shall end, unless sooner terminated as provided in the
Master Lease, on January 31, 1999. In no event shall the expiration date of this
Sublease occur later than the Lease Expiration Date.

<PAGE>

        3.      RENT. Subtenant shall pay rent during the term of this Sublease,
on a full service gross basis, in the amount of $45.771.20 for the Subleased
Premises per month, payable monthly in advance on the first day of each month.
Furthermore, in the event that the term of this Sublease shall begin or end on a
date which is not the first day of a month, rent shall be prorated as of such
date. Concurrent with Subtenant's execution of this Sublease and Sublandlord's
receipt of Landlord's approval of this Sublease, Subtenant shall deliver to
Sublandlord the first month's rent in the amount of $45,523.20 plus the amount
of $45,523.20 as a Security Deposit to be held by Sublandlord pursuant to the
terms of Paragraph 18.3 hereof. See Paragraph 18.10 for additional provisions
concerning the rent and security deposit.

        4.      USE. Subtenant covenants and agrees to use the Subleased
Premises in accordance with the provisions of the Master Lease and for no other
purpose and except as provided herein otherwise in accordance with the terms and
conditions of the Master Lease and this Sublease.

        5.      MASTER LEASE. As applied to this Sublease, the words "Landlord"
and "Tenant" as used in the Master Lease shall be deemed to refer to Sublandlord
and Subtenant hereunder, respectively. Subtenant and this Sublease shall be
subject in all respects to the terms of, and the rights of the Landlord under,
the Master Lease. Except as otherwise expressly provided in Section 7 hereof,
the covenants, agreements, terms, provisions and conditions of the Master Lease
insofar as they relate to the Subleased Premises and insofar as they are not
inconsistent with the terms of this Sublease are made a part of and incorporated
into this Sublease as if recited herein in full, and the rights and obligations
of the Landlord and the Tenant under the Master Lease shall be deemed the rights
and obligations of Sublandlord and Subtenant respectively hereunder and shall be
binding upon and inure to the benefit of Sublandlord and Subtenant respectively.
As between the parties hereto only, in the event of a conflict between the terms
of the Master Lease and the terms of this Sublease, the terms of this Sublease
shall control.

        6.      LANDLORD'S PERFORMANCE UNDER MASTER LEASE.

        6.1     Subtenant recognizes that Sublandlord is not in a position to
render any of the services or to perform any of the obligations required of
Sublandlord by the terms of this Sublease. Therefore, notwithstanding anything
to the contrary contained in this Sublease, Subtenant agrees that performance by
Sublandlord of its obligations hereunder are conditional upon due performance by
the Landlord of its corresponding obligations under the Master Lease and
Sublandlord shall not be liable to Subtenant for any default of the Landlord
under the Master Lease. Subtenant shall not have any claim against Sublandlord
by reason of the Landlord's failure or refusal to comply with any of the
provisions of the Master Lease unless such failure or refusal is a result of
Sublandlord's act or failure to act. This Sublease shall remain in full force
and effect notwithstanding the Landlord's failure or refusal to comply with any
such provisions of the Master Lease and Subtenant shall pay the rent and all
other charges provided for herein without any abatement, deduction or setoff
whatsoever except as provided in the Master Lease. Subtenant covenants and
warrants that it fully understands and agrees to be subject to and bound by all
of the covenants, agreements, terms, provisions and conditions of the Master
Lease, except as modified herein. Furthermore, Subtenant and Sublandlord further
covenant not to take any action or do or perform any act or fail to perform any
act which would result in the failure or


                                      2.

<PAGE>

breach of any of the covenants, agreements, terms, provisions or conditions
of the Master Lease on the part of the Tenant thereunder.

        6.2     Whenever the consent of Landlord shall be required by, or
Landlord shall fail to perform its obligations under, the Master Lease,
Sublandlord agrees to use its best efforts to obtain, at Subtenant's sole cost
and expense, such consent and/or performance on behalf of Subtenant as Subtenant
may reasonably direct Sublandlord.

        6.3     Sublandlord represents and warrants to Subtenant that the Master
Lease is in full force and effect, all obligations of both Landlord and
Sublandlord thereunder have been satisfied and Sublandlord has neither given nor
received a notice of default pursuant to the Master Lease.

        6.4     Sublandlord covenants as follows: (i) not to voluntarily
terminate the Master Lease, (ii) not to modify the Master Lease so as to
adversely affect Subtenant's rights hereunder without first obtaining
Subtenant's prior written consent, and (iii) to take all actions reasonably
necessary to preserve the Master Lease.

        7.      VARIATIONS FROM MASTER LEASE. The following covenants,
agreements, terms, provisions and conditions of the Master Lease are hereby
modified or not incorporated herein:

        7.1     Notwithstanding anything to the contrary set forth in Sections 5
and 6 and 8 of the Summary to the Master Lease or in Articles 2 and 3 of the
Master Lease, the term of this Sublease and the rent payable under thus Sublease
and the amount of the Security Deposit required of Subtenant shall be as set
forth in Sections 2 and 3 above. Article 4 of the Master Lease has been deleted
pursuant to Paragraph 7.6 below as the parties have agreed that Subtenant shall
not be responsible for the payment of Additional Rent as provided in the Master
Lease.

        7.2     The parties hereto represent and warrant to each other that,
except as specified in Paragraph 18.5 hereof, neither party dealt with any
broker or finder in connection with the consummation of this Sublease and each
party agrees to indemnify, hold and save the other party harmless from and
against any and all claims for brokerage commissions or finder's fees arising
out of either of their acts in connection with this Sublease. The provisions of
this Section 7.2 shall survive the expiration or earlier termination of this
Sublease.

        7.3     Notwithstanding anything contained in the Master Lease to the
contrary, as between Sublandlord and Subtenant only, all insurance proceeds or
condemnation awards received by Sublandlord under the Master Lease shall be
deemed to be the property of Sublandlord.

        7.4     Any notice which may or shall be given by either party hereunder
shall be either delivered personally or sent by certified mail, return receipt
requested, addressed to the party for whom it is intended at the Subleased
Premises (if to the Subtenant), or at the Premises (if to the Sublandlord), or
to such other address as may have been designated in a notice given in
accordance with the provisions of this Section 7.4.


                                      3.

<PAGE>

        7.5     All amounts payable hereunder by Subtenant shall be payable
directly to Sublandlord.

        7.6     The provisions of Sections 5, 6, 7, 8, 9, and 10 of the Summary
to the Master Lease, Master Lease Sections 1.4 and related subsections, 2.2 and
related subsections, Article 3, Article 4, Article 18, Article 21, Section 23.4,
Article 28, Section 29.29.2 and Section 29.3 and Exhibits A and E attached to
the Master Lease and Paragraphs 4, 6, 7, 11, 13 and 14 of the First Amendment to
Office Lease shall not apply to this Sublease.

        7.7     Sublandlord shall deliver the Subleased Premises to Subtenant in
their current "as is" condition. The foregoing notwithstanding, Sublandlord
shall be responsible to have the Subleased Premises professionally cleaned and
ready for occupancy prior to August 1, 1995 including patching and painting of
drywall. Further, all building systems (light, electrical, air conditioning and
heat) shall be in good working order.

        7.8     Subtenant shall not be required to remove any currently existing
improvements located in the Subleased Premises upon the expiration of the term
hereof.

        8.      INDEMNITY. Subtenant hereby agrees to protect, defend, indemnify
and hold Sublandlord harmless from and against any and all liabilities, claims,
expenses, losses and damages, including, without limitation, reasonable
attorneys' fees and disbursements, which may at any time be asserted against
Sublandlord by (a) the Landlord for failure of Subtenant to perform any of the
covenants, agreements, terms, provisions or conditions contained in the Master
Lease which by reason of the provisions of this Sublease Subtenant is obligated
to perform, or (b) any person by reason of Subtenant's use and/or occupancy of
the Subleased Premises. The provisions of this Section 8 shall survive the
expiration or earlier termination of the Master Lease and/or this Sublease,
except to the extent any of the foregoing is caused by the negligence of
Sublandlord. See Paragraph 18.11 for additional indemnity provisions.

        9.      CANCELLATION OF MASTER LEASE. In the event of the cancellation
or termination of the Master Lease for any reason whatsoever or of the
involuntary surrender of the Master Lease by operation of law prior to the
expiration date of this Sublease, Subtenant agrees to make full and complete
attornment to the Landlord under the Master Lease for the balance of the term of
this Sublease and upon the then executory terms hereof at the option of the
Landlord at any time during Subtenant's occupancy of the Subleased Premises,
which attornment shall be evidenced by an agreement in form and substance
reasonably satisfactory to the Landlord. Subtenant agrees to execute and deliver
such an agreement at any time within ten (10) business days after request of the
Landlord, and Subtenant waives the provisions of any law now or hereafter in
effect which may give Subtenant any right of election to terminate this Sublease
or to surrender possession of the Subleased Premises in the event any proceeding
is brought by the Landlord under the Master Lease to terminate the Master Lease.

        10.     CERTIFICATES. Each party hereto shall at any time and from time
to time as requested by the other party upon not less than ten (10) days prior
written notice, execute, acknowledge and deliver to the other party, a statement
in writing certifying that this Sublease is unmodified and in full force and
effect (or if there have been modifications that the same is in full force and
effect as modified and stating the modifications, if any), certifying the dates
to


                                      4.
<PAGE>

which rent and arty other charges have been paid and stating whether or not,
to the knowledge of the person signing the certificate, the other party is in
default beyond any applicable grace period provided herein in performance of
any of its obligations under this Sublease, and if so, specifying each such
default of which the signer may have knowledge, it being intended that any
such statement delivered pursuant hereto may be relied upon by others with
whom the party requesting such certificate may be dealing.

        11.     ASSIGNMENT OR SUBLETTING. Subject further to all of the rights
of the Landlord under the Master Lease and the restrictions contained in the
Master Lease, Subtenant shall not be entitled to assign this Sublease or to
sublet all or any portion of the Subleased Premises without the prior written
consent of Sublandlord, which consent may be withheld by Sublandlord in its sole
discretion.

        12.     SEVERABILITY. If any term or provision of this Sublease or the
application thereof to any person or circumstances shall, to any extent, be
invalid and unenforceable, the remainder of this Sublease or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each term
or provision of this Sublease shall be valid and be enforced to the fullest
extent permitted by law.

        13.     ENTIRE AGREEMENT; WAIVER. This Sublease contains the entire
agreement between the parties hereto and shall be binding upon and inure to the
benefit of their respective heirs, representatives, successors and permitted
assigns. Any agreement hereinafter made shall be ineffective to change, modify,
waive, release, discharge, terminate or effect an abandonment hereof, in whole
or in part, unless such agreement is in writing and signed by the parties
hereto.

        14.     CAPTIONS AND DEFINITIONS. Captions to the Sections in this
Sublease are included for convenience only and are not intended and shall not be
deemed to modify or explain any of the terms of this Sublease. All undefined
terms when used herein shall have the same respective meanings as are given such
terms in the Master Lease unless expressly provided otherwise in this Sublease.

        15.     FURTHER ASSURANCES. The parties hereto agree that each of them,
upon the request of the other party, shall execute and deliver, in recordable
form if necessary, such further documents, instruments or agreements and shall
take such further action that may be necessary or appropriate to effectuate the
purposes of this Sublease.

        16.     GOVERNING LAW. This Sublease shall be governed by and in all
respects construed in accordance with the laws of the State of California.

        17.     CONSENT OF LANDLORD. The validity of this Sublease shall be
subject to the Landlord's prior written consent hereto pursuant to the terms of
the Master Lease, and if Landlord's consent shall not be obtained and a copy
thereof delivered to Subtenant by July 26, 1996, each party shall have the
option to cancel this Sublease by written notice to the other.

        18.     ADDENDA. The provisions of this Paragraph 18 shall supplement
the foregoing provisions of the Sublease.


                                      5.
<PAGE>

        18.1    EARLY OCCUPANCY. Notwithstanding the provisions of Paragraph 2
above, after receipt of Landlord's consent to this Sublease, Sublandlord shall
allow Subtenant access to the Subleased Premises prior to the commencement date
for the purpose of Subtenant installing its telephones, computers, furniture and
other fixtures in the Subleased Premises subject to Sublandlord's reasonable
approval. Sublandlord shall deliver the vacant portions of the Subleased
Premises to Subtenant upon mutual execution and delivery of this Sublease. As
soon as reasonably possible thereafter, but in no event later than July 29,
1996, Sublandlord shall deliver the balance of the Subleased Premises to
Subtenant. The commencement date may be accelerated upon mutual agreement of the
parties. Subtenant shall hold Sublandlord harmless from and indemnify, protect
and defend Sublandlord against any loss or damage to the Building or the
Subleased Premises and against injury to any persons occasioned during such
period of early occupancy and resulting from any actions or failures to act by
Subtenant or any of Subtenant's contractors, employees, agents, or invitees.

        18.2    ABATEMENT OF RENT. Notwithstanding the provisions of Paragraph 3
above, no rent shall be due or payable by Subtenant to Sublandlord during the
first two (2) months of the term and for the third (3rd) and fourth (4th) months
of the term rent shall be based upon 24,607 rentable square feet of space or
$39,371.20 per month. Beginning in the fifth (5th) month of the term and for
each month thereafter, the rent shall be as stated in Paragraph 3 above.

        18.3    SECURITY DEPOSIT. Concurrently with Subtenant's execution of
this Sublease and receipt of Landlord's approval of this Sublease, Subtenant
shall deposit with Sublandlord a security deposit (the "Security Deposit") in
the amount set forth in Paragraph 3 above. The Security Deposit shall be held by
Sublandlord as security for the faithful performance by Subtenant of all the
terms, covenants and conditions of this Sublease to be kept and performed by
Subtenant during the term. If Subtenant defaults with respect to any provision
of this Sublease, including, but not limited to, the provisions relating to the
payment of rent, Sublandlord may, but shall not be required to, use, apply or
retain all or any part of the Security Deposit for the payment of any rent or
any other sum in default, or for the payment of any amount that Sublandlord may
spend or become obligated to spend by reason of Subtenant's default, or to
compensate Sublandlord for any other loss or damage that Sublandlord may suffer
by reason of Subtenant's default. If any portion of the Security Deposit is so
used or applied, Subtenant shall, within five (5) days after written demand
therefor, deposit cash with Sublandlord in an amount sufficient to restore the
Security Deposit to its original amount, and Subtenant's failure to do so shall
be a default under this Sublease. If Subtenant shall fully and faithfully
perform every provision of this Sublease to be performed by it, the Security
Deposit, or any balance thereof, shall be returned to Subtenant within thirty
(30) days following the expiration of the term. Subtenant shall not be entitled
to any interest on the Security Deposit and Sublandlord may commingle the
Security Deposit with its general funds.

        18.4    PARKING. Sublandlord shall make available to Subtenant, on
thirty (30) days advanced notice, a minimum of four (4) parking passes for
single and/or tandem unreserved parking spaces, at Sublandlord's option, for
each 1,000 rentable square feet in the Subleased Premises at the prevailing
rates charged by Landlord from time to time. Tenant shall be obligated, each
month, to purchase not less than two (2) such parking passes per 1,000 rentable
square feet in the Subleased Premises at the prevailing rates charged by
Landlord from time to time. Therefore, Sublandlord shall make at least 114
parking passes available to Subtenant and


                                      6.
<PAGE>

Subtenant shall, each month, purchase a minimum of 58 parking passes. The
foregoing notwithstanding, so long as Landlord continues to charge
Sublandlord for only 107 parking passes then Subtenant shall be required to
pay for only its minimum requirement of 58 parking passes even if Subtenant
uses more than 58 parking passes. However, once Landlord begins charging
Sublandlord for parking passes in excess of 107, then Subtenant shall pay
Sublandlord for each parking pass actually used by Subtenant subject to the
minimum number of parking passes specified above. Parking passes requested by
Subtenant in excess of four (4) per 1,000 rentable square feet in the
Subleased Premises shall be made available to Subtenant upon request of
Subtenant only to the extent they are available to Sublandlord at Landlord's
regular prevailing rates.

        18.5    BROKERS. Each party warrants to the other that it has had no
dealings with any real estate broker or agent in connection with the negotiation
of this Sublease except Cushman Realty Corporation and Julien J. Studley, Inc.
and that it knows of no other real estate broker or agent who is or might be
entitled to a commission in connection with this Sublease. Sublandlord covenants
and agrees to pay all real estate commissions due in connection with this
Sublease to such named brokers, but only at such times and in such amounts as
are agreed in writing between Sublandlord and such brokers. Each party agrees to
pay and hold the other harmless from and defend the other against any cost,
expense or liability for any compensation claimed by any other broker, finder or
agent employed or claiming to have been employed by the indemnifying party in
connection with this Sublease or with the negotiation of this Sublease.
Sublandlord and Subtenant acknowledge that payment shall not be a condition
precedent to recovery upon the foregoing indemnification provision.

        18.6    EQUIPMENT ROOM USE AND ACCESS. Subject to the limitations
contained in Paragraph 18.9 below, the Equipment Room designated as hatched on
EXHIBIT B shall be a part of the Subleased Premises. However, Subtenant shall
permit Sublandlord to use a portion of the Equipment Room as hatched on EXHIBIT
D for its communication and computer needs and shall further permit Sublandlord
immediate access to the Equipment Room, 24 hours per day, every day of the year
provided such access does not unreasonably interfere with Subtenant's quiet
enjoyment of the Subleased Premises.

        18.7    FURNITURE. Sublandlord shall provide, for Sublandlord's use
during the term, the existing work stations and furniture which are listed on
the inventory attached hereto as EXHIBIT C, without additional cost to
Subtenant. At the end of the term, all of such existing work stations and
furniture shall be returned to Sublandlord in the same condition as delivered to
Subtenant subject only to reasonable wear and tear.

        18.8    HOLDOVER. With respect to Article 16 of the Master Lease, it is
understood and agreed that Subtenant's liability to Sublandlord for holding over
after the term has expired shall include all of Sublandlord's liability to
Landlord for the entire Premises as well as Subtenant's liability for the
Subleased Premises.

        18.9    SUBLEASED PREMISES. Subject to Sublandlord's rights concerning
use of and access to the Equipment Room, the initial Subleased Premises consists
of the entirety of the fifth (5th) floor. Subtenant may use the Equipment Room
except the area reserved to Landlord (which is depicted on EXHIBIT D), for
purposes of installing and maintaining its communications


                                      7.
<PAGE>

equipment. In no event shall any installations or activities by Subtenant
interfere with Sublandlord's installations and equipment. In connection
therewith, prior to making any installations in or to or modifications of the
Equipment Room, including without limitation, equipment placements and/or
installations, wiring modifications, or air conditioning supplementation,
Subtenant shall submit to Sublandlord for Sublandlord's review and approval,
detailed and fully engineered plans showing the proposed placement,
installation and/or modifications. Sublandlord may reasonably approve or
disapprove such proposal by written notice to Subtenant within ten (10) days
of Sublandlord's receipt of same which notice shall detail any reasons for
disapproval. No placements, installations or modifications shall be
undertaken without prior receipt of Sublandlord's approval. There shall under
no circumstances be any interruption of Sublandlord's operations in the
Equipment Room. Upon thirty (30) days advanced notice from Sublandlord to
Subtenant, Sublandlord may discontinue its use of the Equipment Room and
thereafter the portion of the Equipment Room reserved for Sublandlord as
depicted on EXHIBIT D, shall revert to Subtenant for its use.

        18.10   RENT AND SECURITY DEPOSIT. The parties acknowledge that the rent
and security deposit are based upon the Subleased Premises consisting of 28,607
rentable square feet less the Sublandlord's portion of the Equipment Room which
is agreed by the parties to be 155 rentable square feet. If Sublandlord's
portion of the Equipment Room is surrendered by Sublandlord as provided in
Paragraph 18.9 above, the monthly rent and the security deposit shall each be
increased on the basis of $1.60 per rentable square foot of the Sublandlord's
portion of the Equipment Room or, in each case, $248.00.

        18.11   SUBLANDLORD'S INDEMNITY. Sublandlord hereby agrees to protect,
defend, indemnify and hold Subtenant harmless from and against any and all
liabilities, claims, expenses, losses and damages, including, without
limitation, reasonable attorneys' fees and disbursements, which may at any time
be asserted against Subtenant by (a) the Landlord for failure of Sublandlord to
perform any of the covenants, agreements, terms, provisions or conditions
contained in the Master Lease which by reason of the provisions of this Sublease
Sublandlord is obligated to perform, or (b) any person by reason of
Sublandlord's use and/or occupancy of the Premises excluding the Subleased
Premises. The provisions of this Paragraph 18.11 shall survive the expiration or
earlier termination of the Master Lease and/or this Sublease, except to the
extent any of the foregoing is caused by the negligence of Subtenant.

        18.12   NOTICES OF DEFAULT. In the event that Sublandlord receives from
Landlord or gives to Landlord a notice of default under the Master Lease,
Sublandlord shall, within five (5) business days, provide Subtenant with a copy
of same.


                                      8.
<PAGE>

        IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be
executed as of the day and year first above written.

                            "Sublandlord":

                            THE RAND CORPORATION, a California
                            non-profit public benefit corporation

                             By:        /s/
                                        ----------------------------------------
                                Its:    Vice President, Chief Financial Officer
                                        ----------------------------------------
                             By:
                                        ----------------------------------------
                                Its:
                                        ----------------------------------------

                            "Subtenant":

                            SPECIALTY LABORATORIES, INC., a California
                            corporation

                             By:        /s/
                                        ----------------------------------------
                                Its:    Chairman 7/18/96
                                        ----------------------------------------
                             By:
                                        ----------------------------------------
                                Its:
                                        ----------------------------------------



Landlord hereby approves of the terms of this Sublease and consents thereto.

By:
         -------------------------------------
Its:
         -------------------------------------
Date:                            , 1996
         -------------------------------------


                                      9.
<PAGE>





                                    EXHIBIT A


                                THE MASTER LEASE

                                 (See Attached)















<PAGE>

                           FIRST AMENDMENT TO SUBLEASE
                             AND CONSENT OF LANDLORD

        This FIRST AMENDMENT to SUBLEASE (the "Amendment") is made and entered
into this 9th day of March, 1998 by and between THE RAND CORPORATION, a
California non-profit corporation ("Sublandlord"), and SPECIALTY LABORATORIES,
INC., a California corporation ("Subtenant"), with respect to the following:


                                    RECITALS

        A.      Sublandlord, as tenant, and Water Garden Associates, a Delaware
limited partnership, as landlord, have entered into a certain Office Lease dated
January 20, 1993 (the "Original Lease"). The landlord's interests under the
Lease (defined below) are now held by Water Garden Company L.L.C., a Delaware
Limited Liability Company ("Landlord"). The Original Lease covers certain
premises on the 5th and 6th floors and on the P-1 level of the parking facility
(collectively, the "Premises") of the Water Garden, which is located at 1620
26th Street (the "Building"), Santa Monica, California. The Lease has been
amended by that certain side letter dated January 20, 1993 (the "Side Letter"),
a First Amendment to Office Lease dated February 8, 1993 (the "First
Amendment"), a Second Amendment to Office Lease and Consent to Sublease
Agreement dated July 26, 1996 (the "Second Amendment"), and a Third Amendment to
Lease dated March 9, 1998 (the "Third Amendment"). A copy of the Third Amendment
is attached hereto as Exhibit "A." The Original Lease as amended by the Side
Letter, First Amendment, Second Amendment, and Third Amendment is hereinafter
referred to as the "Lease."

        B.      Sublandlord and Subtenant have entered into a certain "Standard
Form Sublease" dated July 9, 1996 (the "Sublease"). The Sublease covers a
portion of the Premises consisting of the entire fifth (5th) floor of the
Building and commonly known as Suite 500S (the "Subleased Premises"). The Second
Amendment (defined in Recital A, above) modified certain terms and conditions of
the Sublease and contained Landlord's consent thereto. References hereinafter to
the Sublease shall be to the Sublease as modified by the Second Amendment,
except that specific paragraph references shall be to the original Sublease.

        C.      Sublandlord and Subtenant desire to enter into this Amendment in
order to extend the Term of the Sublease and to establish the rent and other
terms and conditions for the additional term.


                                    AGREEMENT

        IN CONSIDERATION of the foregoing recitals and the mutual promises and
covenants contained herein, Sublandlord and Subtenant agree as follows:

        1.      EXTENSION OF SUBLEASE. The term of the Sublease shall be
extended for one (1) additional period of five (5) years (the "Additional
Term").


<PAGE>

        a.      The Additional Term shall commence on February 1, 1999 and
expire on January 31, 2004.

        b.      There shall be no option to further extend the term of the
Sublease.

        c.      The provisions of Article 4 of the Master Lease have been
deleted pursuant to Paragraph 7.6 below as the parties have agreed that
Subtenant shall not be responsible for the payment of Additional Rent as
provided in the Master Lease and Paragraphs 2, 18.1, 18.2, and 18.4 of the
Sublease and Section 1.1 of the Second Amendment shall have no further
application during the Additional Term.

        d.      Subtenant shall have the right ("Subtenant's Cancellation
Right") to cancel the Sublease effective upon a date (the "Cancellation Date")
which occurs between February 1, 2002 and July 30, 2002 (i.e., the commencement
of the thirty-seventh (37th) month of the Additional Term through the last day
of the forty-second (42nd) month of the Additional Term), provided that (i)
Sublandlord receives written notice from Subtenant (the "Cancellation Notice")
at least twenty (20) days before the fourteenth (14th) month prior to the
Cancellation Date (i.e., between November 11, 2000 and May 12, 2001) that
Subtenant intends to cancel and terminate the Sublease effective upon the
Cancellation Date pursuant to the terms and conditions of this Section 1(d) and
(ii) as of the date of delivery of the Cancellation Notice and as of the
Cancellation Date, Subtenant is not in monetary or material non-monetary default
under the Sublease beyond the expiration of any applicable cure period. In the
event that Subtenant elects to cancel the Sublease as set forth above in this
Section 1(d), the Sublease shall automatically terminate and be of no further
force or effect and Sublandlord and Subtenant shall be relieved of their
respective obligations under the sublease as of the Cancellation Date, except
those obligations set forth in the Sublease which specifically survive the
expiration or earlier termination of the Sublease including, without limitation,
the payment by Subtenant of all amounts owed by Subtenant under the Sublease up
to and including the Cancellation Date. The rights contained in this Section
1(d) shall be personal to the Subtenant named on page 1 of this Amendment (the
"Original Subtenant") and may only be exercised by the Original Subtenant (and
not any assignee, subsublessee or other transferee of Subtenant's interest in
the Sublease).

        e.      If Sublandlord exercises Tenant's Cancellation Right on
Sublandlord's own initiative (i.e., not in response to Subtenant's exercise of
Subtenant's Cancellation Right) and Landlord (i) recognizes the Sublease but
does not agree to be bound by all of the terms and provisions of the Sublease or
(ii) for any reason refuses to recognize the Sublease in connection with the
exercise of Tenant's Cancellation Right, then the Sublease will continue in full
force and effect and Sublandlord will rescind its exercise of Tenant's
Cancellation Notice.

        1.      RENT.

        a.      Annual rent for the Additional Term shall be $858,210.00 ($30.00
per rentable square foot). Monthly installments of rent for the Additional Term
shall be $71,517.50 ($2.50 per rentable square foot).

        b.      In addition to all other rent and other obligations payable
under the Sublease and this Amendment, during the Additional Term, Subtenant
shall pay all Additional


                                      2.
<PAGE>

Rent required to be paid by Sublandlord pursuant to Paragraph 4.2 of the Third
Amendment. The provisions of the Lease applicable to Additional Rent are
attached hereto as Exhibit "B" for reference purposes only and shall not limit
in any way the provisions of this subparagraph (b) or Paragraph 4.2 of the Third
Amendment.

        3.      SUBLEASED PREMISES. The Subleased Premises shall remain as
described in the Sublease during the Additional Term and is mutually agreed to
contain 28,607 rentable square feet. Notwithstanding the foregoing, during the
Additional Term, Subtenant shall be entitled to use (i) the entire Equipment
Room described in Recital B and Paragraphs 18.6 and 18.9 of and Exhibit "B" to
the Sublease, which Equipment Room shall not be used by Sublandlord, and (ii)
the "HVAC Unit" described in Section 11 of the Third Amendment, subject to all
terms and conditions set forth therein. Subtenant shall indemnify and hold
harmless Sublandlord from any costs, liabilities or other expenses (including
without limitation attorneys' fees) incurred as a result of Subtenant's removal,
relocation, installation, operation or maintenance of the HVAC Unit.

        4.      SECURITY DEPOSIT. The Security Deposit for the Additional Term
shall be $71,517.50, of which $45,523.20 has previously been paid by Subtenant
to Sublandlord. The balance of $25,994.30 is due and payable by Subtenant upon
execution of this Amendment.

        5.      PARKING. During the Additional Term, Subtenant shall be required
to pay for and be entitled to use forty (40) parking passes ("Minimum Passes")
applicable to the Subleased Premises. Upon written notice from Subtenant
requesting additional parking passes, Sublandlord shall provide and Subtenant
shall pay for up to fifteen (15) additional parking passes out of Sublandlord's
allocation of parking passes granted to Sublandlord under Section 7 of the Third
Amendment ("Sublandlord's Passes"). Subtenant shall have the right upon thirty
(30) days written notice to Sublandlord, from time to time, to increase or
decrease the number of Sublandlord's Passes provided to Subtenant, but not to
exceed Sublandlord's allocation. In addition Subtenant shall have the right, but
not the obligation, to rent during the period commencing February 1, 1999 and
expiring January 31, 2000 (the "Additional Pass Period"), up to twenty-six (26)
additional unreserved parking passes on a monthly basis (the "Additional
Passes"), which passes shall pertain to the Project parking facility. Subtenant
may change the number of Additional Passes rented during the Additional Pass
Period upon forty (40) days prior written notice to Sublandlord provided that in
no event shall Subtenant be entitled to rent more than twenty-six (26)
Additional Passes. Subtenant shall provide notice to Sublandlord no later than
December 20, 1999, specifying how many Additional Passes, if any, Subtenant
desires to continue to rent for the period commencing February 1, 2000, and
ending at the expiration of the Additional Term and commencing February 1, 2000,
Subtenant shall rent the number of Additional Passes specified in Subtenant's
notice for the remainder of the Additional Term, provided that in no event shall
Subtenant be entitled to rent more than twenty-six (26) Additional Passes. If
Subtenant requests parking passes in excess of the Minimum Passes plus
Sublandlord's Passes plus any Additional Passes Subtenant is entitled to rent as
set forth above, Sublandlord's sole obligation shall be to request such excess
number of passes from Landlord. All parking contracts during the Additional Term
shall be at Landlord's prevailing rate plus the full amount of any taxes imposed
by any governmental authority in connection with the renting of such parking
passes by Subtenant or the use of the parking facility by Subtenant. Subtenant's
use of all parking passes provided under this Section 5 shall be subject to all
of the provisions of

                                      3.
<PAGE>

the Lease. In addition to the foregoing, Subtenant shall be entitled to use the
twenty-five (25) additional parking passes to be provided during the Additional
Term as set forth in the last sentence of Section 7 of the Third Amendment.

        6.      FURNITURE. During the Additional Term, Subtenant shall be
entitled to continue using the work stations and furniture described in
Paragraph 18.7 of the Sublease subject to the terms and conditions set forth
therein.

        7.      NO IMPROVEMENTS. Subtenant shall remain in the Subleased
Premises at the commencement of the Additional Term in its then-current, "as-is"
condition and Sublandlord shall have no obligation to perform any work or
install any improvements within the Subleased Premises.

        8.      LANDLORD'S RECOGNITION OF SUBTENANT. Subject to the other
provisions of this Amendment, Subtenant agrees to be bound by and comply with
all provisions of Section 8.2 of the Third Amendment within the time periods set
forth therein, including, without limitation, delivery to Landlord of all
documents necessary to demonstrate whether or not Subtenant is Financially
Capable and execution of the Recognition agreement subject to all the conditions
set forth in Section 8.2.1. If Landlord Recognizes Subtenant and Landlord fails
to credit Subtenant with any rent or Additional Rent paid by Subtenant to
Sublandlord, then Sublandlord shall on demand pay Subtenant the amount of rent
and/or Additional Rent which Landlord fails to credit to Subtenant.

        9.      CONFIDENTIALITY. The parties hereto agree that the terms of this
Amendment are confidential and constitute proprietary information of the parties
hereto. Each of the parties hereto agrees that it and its respective partners,
officers, directors, employees and attorneys shall not disclose the terms and
conditions of this Amendment to any other person other than Landlord without the
prior written consent of the other party hereto except pursuant to an order of a
court of competent jurisdiction; provided, however, that Sublandlord may
disclose the terms hereof to any lender now or hereafter having a lien on
Sublandlord's interest in the Subleased Premises or any portion thereof, and
either party may disclose the terms hereof including providing copies of or
filing this Amendment with its independent accountants who review its financial
statements or prepare its tax returns, to its counsel, bankers, investment
bankers, brokers, governmental agencies or other persons to whom disclosure is
required as a matter of law or a requirement of diligent inquiry imposed by law
and in any action which is brought to prevent the breach or continued breach of
the Sublease or to seek damages or any other available remedy for any breach or
alleged breach.

        10.     BROKERS. Each of Sublandlord and Subtenant represents and
warrants to the other that other than Muselli Commercial Real Estate ("Broker"),
which shall be paid by Sublandlord pursuant to a separate agreement, it has
employed no broker, finder or real estate agent in connection with this
Amendment and the transactions provided for herein, and that there is no broker,
finder or real estate agent who is entitled to a fee or commission from or
through such indemnifying party in connection with this Amendment or the
transactions provided for herein. Each of Sublandlord and Subtenant agrees to
indemnify, defend and hold the other harmless from and against all claims for a
fee or commission by any broker, finder or agent other than Broker, claiming
through such indemnifying party with respect to this Amendment or the

                                      4.
<PAGE>

transactions provided for herein. Payment shall not be a condition precedent to
recovery upon the foregoing indemnification provision. The foregoing
indemnification provision shall be deemed to include a covenant by each
indemnifying party to defend the indemnified party against claims covered by
such indemnification with legal counsel reasonably satisfactory to the
indemnified party.

        11.     ADDITIONAL PAYMENT. In addition to Subtenant's payment of
monthly installments of rent and Additional Rent pursuant to Section 2 of this
Amendment ("Base Rent"), beginning on February 1, 1999, Subtenant shall pay to
Sublandlord the amount of $2,860.70 per month ($.10 per rentable square foot per
month) to provide for Subtenant's payment to Sublandlord of certain costs
incurred by Sublandlord in connection with this Amendment (the "Additional
Payment"). The Additional Payment shall be payable by Subtenant to Sublandlord
if, as and when Subtenant is obligated to pay monthly installments of rent under
Section 2.a. of this Amendment and shall continue to be so payable by Subtenant
to Sublandlord (i.e., the Additional Payment shall be payable and delivered to
The Rand Corporation and not to Landlord) and Sublandlord shall be a third party
beneficiary of Subtenant's obligations under this Section 11 after the
Cancellation Date if a Recognition agreement is executed between Subtenant and
Landlord pursuant to Section 8.2 of the Third Amendment, or a substantially
equivalent arrangement exists between Subtenant and Landlord. Landlord shall
have no right, title or interest in or to the Additional Payment.

        12.     COUNTERPARTS. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

        13.     DEFINED TERMS. All terms used in this Amendment with initial
capital letters and not defined herein shall have the meanings given to such
terms in the Sublease or otherwise in the Lease.

        14.     SUBLEASE IN EFFECT/RELATION TO MASTER LEASE. Sublandlord and
Subtenant acknowledge and agree that the Sublease, as hereby modified and
supplemented, remains in full force and effect in accordance with its terms.
Without limiting the generality of the foregoing, the provisions of Paragraph 5
of the Sublease shall apply to the rights and obligations of Landlord and
Sublandlord set forth in the Third Amendment. Sublandlord shall have no
liability to Subtenant in the event of a termination of the Lease caused by any
reason other than a default by Sublandlord under the Lease or voluntary
termination of the Lease by Sublandlord.

        15.     CONSENT OF LANDLORD. The validity of this Amendment shall be
subject to the Landlord's prior written consent hereto pursuant to the terms of
the Lease. In the event Landlord has not executed a written consent hereto by
March 31, 1998, either party may cancel this Amendment by written notice to the
other.

        16.     LANDLORD'S ELECTION TO TERMINATE. Sublandlord shall deliver
notice to Subtenant of Landlord's election to terminate the Lease pursuant to
Section 13 of the Third Amendment within five (5) days following Sublandlord's
receipt thereof.


                                      5.
<PAGE>

        IN WITNESS WHEREOF, Sublandlord and Subtenant have executed and
delivered this First Amendment to Sublease as of the day and year first above
written.

SPECIALITY LABORATORIES, INC.,   THE RAND CORPORATION, a California
a California corporation         non-profit corporation

By:    /s/                            By:    /s/
      ---------------------------------     ------------------------------------
Title: President                      Title: Executive Vice President
      ---------------------------------     ------------------------------------

By:    /s/                            By:    /s/ Vivian J. Arterbery
      ---------------------------------     ------------------------------------
Title: V.P. Finance                   Title: Coporate Secretary
      ---------------------------------     ------------------------------------
                   "Subtenant"                            "Sublandlord"

















                                      6.

<PAGE>



                               CONSENT OF LANDLORD

        The undersigned is the owner of the Building and is the Landlord under
the Lease described in the foregoing Amendment and hereby consents to the
Amendment, subject to all conditions of the Landlord's consent set forth in the
Second Amendment. In addition, Landlord agrees to the provisions of Section 11
of the Amendment. Landlord hereby certifies that to the best of Landlord's
knowledge, no Tenant default currently exists under the Lease.

                                WATER GARDEN COMPANY, L.L.C., a
                                Delaware limited liability company

                                By:     /s/ George L. Ochs
                                        ----------------------------------------
                                Its:   George L. Ochs
                                       -----------------------------------------
                                        Vice President
                                By:
                                        ----------------------------------------
                                Its:
                                       -----------------------------------------















                                      7.

<PAGE>



                            THIRD AMENDMENT TO LEASE

        THIS THIRD AMENDMENT TO LEASE ("Third Amendment") is made and entered
into as of March 9, 1998, by and between WATER GARDEN COMPANY L.L.C., a Delaware
Limited Liability Company ("Landlord"), and THE RAND CORPORATION, a California
non-profit public benefit corporation ("Tenant").


                                    RECITALS:

        A.      Landlord's predecessor-in-interest, Water Garden Associates, a
Delaware limited partnership, and Tenant, entered into that certain Office Lease
dated January 20, 1993 (the "Office Lease"), as amended by that certain side
letter dated January 20, 1993 (the "Side Letter"), that certain First Amendment
to Office Lease dated February 8, 1993 (the "First Amendment") and that certain
Second Amendment to Office Lease and Consent to Sublease Agreement (the "Second
Agreement") (the Office Lease, Side Letter, First Amendment and Second Amendment
are hereafter collectively referred to as the "Lease"), pertaining to the lease
of (i) approximately 28,607 rentable square feet of space commonly known as
Suite 500 ("Suite 500") and located on the fifth (5th) floor of the South tower
of the building located at 1620 26th Street, Santa Monica, California (the
"Building"), (ii) approximately 25,013 rentable square feet of space commonly
known as Suite 600 ("Suite 600") and located on the sixth (6th) floor of the
South tower of the Building, and (iii) approximately 12,700 rentable square feet
of space located on the P-1 level of the Project parking facility, as shown on
Exhibit "E" to the Office Lease (the "Print Facility") (the space described in
items (i) and (ii), above, shall hereafter be collectively referred to as the
"Premises").

        B.      Landlord and Tenant desire to amend the Lease on the terms and
conditions set forth in this Third Amendment.

        NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:


                                    AMENDMENT

        1.      TERMS. All undefined terms when used herein shall have the same
respective meanings as are given such terms in the Lease unless expressly
provided otherwise in this Third Amendment.

        2.      SUBTRACTION FROM ORIGINALLY LEASED PREMISES. The Premises
presently consists of approximately 53,620 rentable square feet and shall
continue to consist of approximately 53,620 rentable square feet until Tenant
vacates and surrenders Suite 600. Effective as of May 1, 1998 (the "Give Back
Date"), and subject to the last sentence of this Section 2, Landlord and Tenant
hereby agree that each of them shall be fully and unconditionally released and
discharged from their respective obligations arising under the Lease, as amended
hereby, after the Give Back Date with respect to Suite 600, provided that Tenant
shall remain

<PAGE>

liable with respect to the period of its tenancy of Suite 600 for the
performance of all of its obligations under the Lease, as amended hereby.
Landlord and Tenant agree that, as of the Give Back Date, subject to Section
4 of the First Amendment, the Premises shall instead consist of Suite 500
only. As of the Give Back Date, subject to Section 4 of the First Amendment,
all references in the Lease, as amended hereby, and this Third Amendment to
the "Premises" shall be deemed to refer to Suite 500, and page 2 of Exhibit A
attached to the Office Lease, as amended, shall be deleted. Tenant hereby
agrees to vacate Suite 600 and surrender and deliver exclusive possession
thereof to Landlord on or before the Give Back Date, in accordance with the
provisions of the Lease, as amended hereby, and in the event that Tenant
fails to timely vacate and surrender Suite 600, then notwithstanding any
contrary provision of this Section 2, Tenant shall be deemed to be holding
over in Suite 600 and the terms of Article 16 of the Office Lease, as
amended, shall apply to such holder.

        3.      NEW LEASE TERM. Notwithstanding anything to the contrary in the
Lease, the Lease Term (i) with respect to Suite 500 shall end on January 31,
2004, and (ii) with respect to the Print Facility shall end on May 30, 2004,
unless sooner terminated as provided in the Lease, as hereby amended. The period
commencing on February 1, 1999 (the "Extended Term Commencement Date") and
ending on May 30, 2004 shall hereafter be referred to as the "Extended Term".

        4.      RENT.

        4.1     BASE RENT.

        4.1.1   SUITE 500. Notwithstanding any contrary provision of Section 6
of the Summary, commencing on February 1, 1999 and continuing through January
31, 2004 (the "Suite 500 Term"), the monthly installments of Base Rent for Suite
500 shall be Seventy-One Thousand Five Hundred Seventeen and 50/100 Dollars
($71,517.50) (I.E., $2.50 per rentable square foot of Suite 500 per month times
28,607 rentable square feet).

        4.1.2   PRINT FACILITY. Notwithstanding any contrary provisions of
Section 21.3 of the Office Lease, commencing on February 1, 1999 and continuing
throughout the remainder of the Extended Term, the monthly installments of Base
Rent for the Print Facility shall be equal to Fifteen Thousand Eight Hundred
Seventy-Five and No/100 Dollars ($15,875.00) (I.E., $1.25 per rentable square
foot of the Print Facility times 12,700 rentable square feet). Notwithstanding
the foregoing, beginning our the Extended Commencement Date, Tenant shall not be
required to pay an amount equal to Sixty-Three Thousand Five Hundred and No/100
Dollars ($63,500.00) of Base Rent for the Print Facility which is attributable
to the Base Rent for the Print Facility for the first four (4) months of the
Extended Term.

        4.2     ADDITIONAL RENT. Except as specifically set forth in this
Section 4.2, Tenant's payment of Tenant's Share of the annual Project Expenses
shall be governed by the terms of Article 4 of the Office Lease. Notwithstanding
anything to the contrary set forth in the Lease, and effective as of the
applicable date set forth below, for purposes of calculating the amount of
Tenant's Share of the annual Project Expenses which Tenant shall pay thereafter
in connection with Suite 500, the following shall apply:


                                      2.
<PAGE>

        4.2.1   Effective as of the Give-Back Date, Tenant's Share shall equal
8.595%; and

        4.2.2   Effective as of February 1, 1999, the "Base Year" shall be
calendar year 1999.

        5.      CONDITION OF THE PREMISES. Tenant hereby acknowledges that (i)
Tenant is currently occupying the Premises and the Print Facility pursuant to
the terms of the Lease, and therefore Tenant shall, during the applicable
portion of the Extended Term, continue to accept the Premises and the Print
Facility in their presently existing, "as is" condition, (ii) Landlord shall
have no obligation to provide or pay for any improvements to the Premises or the
Print Facility, and (iii) neither Landlord nor any agent of Landlord has made
any representation or warranty regarding the condition of the Premises or the
Print Facility or the suitability of the Premises or the Print Facility for the
conduct of Tenant's business.

        6.      BROKERS. Landlord and Tenant hereby warrant to each other that
they have had no dealings with any real estate broker or agent in connection
with the negotiation of this Third Amendment other than Tooley & Company and
Julian J. Studley, Inc. (the "Brokers"), and that they know of no other real
estate broker or agent who is entitled to a commission in connection with this
Third Amendment. Each Party hereby agrees to indemnify and defend the other
party against and hold the other party harmless from any and all claims,
demands, losses, liabilities, lawsuits, judgments, costs and expenses (including
without limitation reasonable attorneys' fees) with respect to any leasing
commission or equivalent compensation alleged to be owing on account of any
dealings with any real estate broker or agent, other than the Brokers, occurring
by, through or under the indemnifying party. The terms of this Section 6 shall
survive the expiration or earlier termination of the term of the Lease, as
hereby amended.

        7.      PARKING. Effective as of February 1, 1999, Article 28 of the
Office Lease shall be deleted and shall be of no further force and effect.
Tenant shall rent from Landlord, commencing on the Extended Term Commencement
Date, fifty-five (55) unreserved parking passes on a monthly basis throughout
the Extended Term (the "Must Rent Passes"), which parking passes shall pertain
to the Project parking facility; provided, however, that commencing on February
1, 2004, Tenant may change the number of Must Rent Passes rented pursuant to
this Section 7 upon at least thirty (30) days prior written notice to Landlord,
provided that in no event shall Tenant be entitled to rent more than fifty-five
(55) Must Rent Passes. In addition, Tenant shall have the right, but not the
obligation, to rent during the period commencing February 1, 1999 and expiring
January 31, 2000 (the "Additional Pass Period"), up to twenty-six (26)
additional unreserved parking passes on a monthly basis (the "Additional
Passes"), which passes shall pertain to the Project parking facility. Tenant may
change the number of Additional Passes rented during the Additional Pass Period
upon thirty (30) days prior written notice to Landlord, provided that in no
event shall Tenant be entitled to rent more than twenty-six (26) Additional
Passes. Tenant shall provide notice to Landlord no later than January 1, 2000,
specifying how many Additional Passes, if any, Tenant desires to continue to
rent for the period commencing February 1, 2000 and ending at the expiration of
the Extended Term, and commencing February 1, 2000, Tenant shall rent the number
of Additional Passes specified in Tenant's notice for the remainder of the
Extended Term, provided that in no event shall Tenant be entitled to rent more
than twenty-six (26) Additional Passes. Further, subject to availability, Tenant
may rent,


                                      3.
<PAGE>

on a month-to-month basis, additional parking passes for unreserved parking
spaces in the Project parking facility directly from the Project parking
facility operator. Tenant shall pay to Landlord for automobile parking passes
on a monthly basis the prevailing rate charged from time to time at the
location of such parking passes; provided, however, that in no event shall
the parking rates in any Lease Year (exclusive of any taxes imposed by any
governmental authority) exceed the parking rates charged in the Comparable
Buildings for comparably located parking passes. In addition, Tenant shall be
responsible for the full amount of any taxes imposed by any governmental
authority in connection with the renting of such parking passes by Tenant or
the use of the parking facility by Tenant. Tenant shall abide by all rules
and regulations which are prescribed from time to tune for the orderly
operation and use of the parking facility where the parking passes are
located, including any sticker or other identification system established by
Landlord and Tenant shall use its good faith efforts to cause its employees
and visitors to comply with such rules and regulations. Landlord specifically
reserves the right to change the size, configuration, design, layout and all
other aspects of the Project parking facility at any time and Tenant
acknowledges and agrees that Landlord may, without incurring any liability to
Tenant and without any abatement of Rent under the Lease, as amended by this
Third Amendment, from time to time, temporarily close-off or restrict access
to the Project parking facility for purposes of permitting or facilitating
any such construction, alteration or improvements. Landlord shall use
commercially reasonable efforts to minimize such restricted access and shall
use commercially reasonable efforts to provide to Tenant alternative parking
during such temporary period which shall be adjacent to the Project and shall
provide reasonably adequate security and, when appropriate, shuttle services,
to and from such alternate parking area to minimize any inconvenience to
Tenant resulting from such temporary closure. Landlord may delegate its
responsibilities hereunder to a parking operator in which case such parking
operator shall have all the rights of control attributed hereby to the
Landlord. The parking passes rented by Tenant pursuant to this Section 7 are
provided to Tenant solely for use by Tenant's own personnel and such passes
may not be transferred, assigned, subleased or otherwise alienated by Tenant
without Landlord's prior approval; provided, however, that during the period
that Specialty Laboratories, Inc., a California corporation ("Specialty
Laboratories") subleases Suite 500 pursuant to the Sublease (as that term is
defined in the Second Amendment), Landlord hereby approves the use of such
parking passes by Specialty Laboratories. Tenant may validate visitor parking
by such method or methods as the Landlord may establish, at the validation
rate from time to time generally applicable to visitor parking. Effective as
of February 1, 1999, Landlord shall provide Tenant with twenty-five (25)
parking cards, at no charge or cost to Tenant (excepting the cost, if any, of
the parking cards themselves), valid from 6:45 p.m. to 1:15 a.m. which will
entitle Tenant's employees (or Specialty Laboratories' employees, as the case
may be) to park during such hours.

        8.      TENANT'S CANCELLATION RIGHT; RECOGNITION OF SPECIALTY
LABORATORIES AS TENANT.

        8.1     TENANT'S CANCELLATION RIGHT. Tenant shall have the right
("Tenant's Cancellation Right") to cancel the Lease, as amended by this Third
Amendment, with respect to Suite 500 only, effective upon a date (the
"Cancellation Date") which occurs between February 1, 2002 and July 30, 2002
(I.E., the commencement of the thirty-seventh (37th) month of the Extended Term
through the last day of the forty-second (42nd) month of the Extended Term),
provided that (i) Landlord receives written notice from Tenant (the
"Cancellation


                                      4.
<PAGE>

Notice") at least fourteen (14) months prior to the Cancellation Date that
Tenant intends to cancel and terminate the Lease, as amended by this Third
Amendment, effective upon the Cancellation Date, pursuant to the terms and
conditions of this Section 8.1, (ii) as of the date of delivery of the
Cancellation Notice and as of the Cancellation Date, Tenant is not in
monetary or material non-monetary default under the Lease, as amended by this
Third Amendment, beyond the expiration of any applicable cure period, and
(iii) on or before the date which is six (6) months prior to the applicable
Cancellation Date, Landlord receives from Tenant a check in the amount of the
applicable "Termination Fee," as that term is defined below, as consideration
for such early termination right. In the event that Tenant elects to cancel
the Lease, as amended by this Third Amendment, as set forth above in this
Section 8.1, the Lease, as amended by this Third Amendment, with respect to
Suite 500, shall automatically terminate and be of no further force or effect
and Landlord and Tenant shall be relieved of their respective obligations
under the Lease, as amended by this Third Amendment, as of the Cancellation
Date, except those obligations set forth in the Lease, as amended by this
Third Amendment, which specifically survive the expiration or earlier
termination of the Lease, as amended by this Third Amendment, including,
without limitation, the payment by Tenant of all amounts owed by Tenant under
the Lease, as amended by this Third Amendment, up to and including the
Cancellation Date. The rights contained in this Section 8.1 shall be personal
to the Tenant named on page 1 of this Third Amendment (the "Original Tenant")
and may only be exercised by the Original Tenant (and not any assignee,
sublessee or other transferee of Tenant's interest in the Lease, as amended
by this Third Amendment). For purposes of this Section 8, the "Termination
Fee" shall be (a) Forty-One Thousand Nine Hundred Thirty-Nine and 00/100ths
Dollars ($41,939.00) if the Cancellation Date occurs during the
thirty-seventh (37th) month of the Extended Term, (b) Forty Thousand One
Hundred Fifteen and 00/100ths Dollars ($40,115.00) if the Cancellation Date
occurs during the thirty-eighth (38th) month of the Extended Term, (c)
Thirty-Eight Thousand Two Hundred Ninety-Two and 00/100ths Dollars
($38,292.00) if the Cancellation Date occurs during the thirty-ninth (39th)
month of the Extended Term, (d) Thirty-Six Thousand Four Hundred Sixty-Eight
and 00/100ths Dollars ($36,468.00) if the Cancellation Date occurs during the
fortieth (40th) month of the Extended Term, (e) Thirty-Four Thousand Six
Hundred Forty-Five and 00/100ths Dollars ($34,645.00) if the Cancellation
Date occurs during the forty-first (41st) month of the Extended Term, and (f)
Thirty-Two Thousand Eight Hundred Twenty-Two and 00/100ths Dollars
($32,822.00) if the Cancellation Date occurs during the forty-second (42nd)
month of the Extended Term. Notwithstanding anything to the contrary set
forth in this Section 8.1, Tenant shall not be required to deliver the
Cancellation Fee to Landlord if Tenant requests, and Landlord approves, the
"Recognition," as that term is defined in Section 8.2.1, below, in accordance
with the terms of Section 8.2, below.

        8.2     Landlord's Recognition of Specialty Laboratories as Tenant Upon
Lease Termination.

        8.2.1   GENERAL TERMS. Tenant may request, as part of its Cancellation
Notice, that Landlord, upon the Cancellation Date, recognize the Sublease as a
direct lease between Landlord and Specialty Laboratories (the "Recognition"),
provided that Landlord shall only so recognize the Sublease under the following
conditions (which conditions must be reflected in a written agreement executed
by Landlord and Specialty Laboratories): (i) Landlord shall not be bound by any
terms or conditions of the Sublease which are inconsistent with the terms and
conditions of the Lease, as amended by this Third Amendment; provided, however,
the economic


                                      5.
<PAGE>

terms of such Sublease may be more favorable to Landlord than those set forth
in the Lease, as amended by this Third Amendment, (ii) Landlord shall not be
liable for any act or omission of Tenant, (iii) Landlord shall not be subject
to any offsets or defenses which Specialty Laboratories might have as to
Tenant or to any claims for damages against Tenant, (iv) Landlord shall not
be required or obligated to credit Specialty Laboratories with any rent or
additional rent paid by Specialty Laboratories to Tenant, (v) Landlord shall
be responsible for performance of only those covenants and obligations of
Tenant pursuant to the Sublease accruing after the Cancellation Date, (vi)
Specialty Laboratories shall agree, upon termination of the Lease, as amended
by this Third Amendment, to make full and complete attornment to Landlord, as
lessor, pursuant to a written agreement executed by Landlord and Specialty
Laboratories, so as to establish direct privity of contract between Landlord
and Specialty Laboratories with the same force and effect as though the
Sublease was originally made directly between Landlord and Specialty
Laboratories, (vii) Specialty Laboratories must be, as of the "Final Notice
Date," as that term is defined in Section 8.2.3, below, financially capable
("Financially Capable") of performing the obligations of the Tenant with
respect to Suite 500 for the remaining portion of the Suite 500 Term, and
(viii) Landlord shall not be required to pay any brokerage commissions in
connection with the Recognition.

        8.2.2   FINANCIALLY CAPABLE. For purposes of this Section 8.2,
"Financially Capable" shall mean that as of the Cancellation Date, Specialty
Laboratories has, as determined by a financial statement audited by a certified
public accountant, (a) a current ratio (I.E., current assets to current
liabilities) of at least 1.5:1, (b) a net worth of at least Fifteen Million
Dollars ($15,000,000.00), (c) net annual income of at least Six Million Dollars
($6,000,000.00), and (d) accounts receivable as a percentage of net revenue
("Accounts Receivable Percentage") which is not substantially greater than the
Accounts Receivable Percentage on the date of this Third Amendment. Tenant
shall, concurrently with Tenant's delivery of the Cancellation Notice to
Landlord and/or, within ten (10) business days of Landlord's written request,
given at any time prior to the Cancellation Date, deliver documentation
demonstrating whether or not Specialty Laboratories is Financially Capable.
Landlord shall have a reasonable approval right as to whether Specialty
Laboratories is Financially Capable of performing the obligations of the Tenant
with respect to Suite 500 for the remaining portion of the Suite 500 Term.

        8.2.3   LANDLORD'S RESPONSE. Landlord shall, pursuant to notice received
by Tenant ("Landlord's Recognition Notice"), within thirty (30) clays of
Landlord's receipt of the Cancellation Notice and the documentation described in
Section 8.2.2, above, either (i) approve the Recognition and notify Tenant, at
that time, whether (a) the Suite 500 Term will terminate, in Landlord's sole
discretion, following the fifty-third (53rd) month or the sixtieth (60th) month
of the Suite 500 Term, and/or (b) there are inconsistent terms and/or conditions
of the Sublease by which Landlord refuses to bound in accordance with item (i)
of Section 8.2.1, above, or (ii) disapprove the Recognition, in which event
Landlord's Recognition Notice shall set forth in detail the grounds for such
disapproval; provided, however, that if Landlord (A) approves the Recognition
pursuant to item (i), above, but notifies Tenant that there are inconsistent
terms and/or conditions of the Sublease by which Landlord refuses to bound in
accordance with item (i) of Section 8.2.1, above, or (B) disapproves the
Recognition pursuant to item (ii) above, Tenant may, by delivering written
notice to Landlord within ten (10) business days of receipt of Landlord's
Recognition Notice, rescind its exercise of Tenant's Cancellation Right, in
which event the Lease, as amended, will continue in full force and effect.
Notwithstanding anything to


                                      6.
<PAGE>

the contrary set forth in this Section 8.2, Landlord reserves the right to
notify Tenant in writing, at least six (6) months prior to the applicable
Cancellation Date (the "Final Notice Date"), that Landlord will be
disapproving of the Recognition in accordance with item (vii) of Section
8.2.1, above. Tenant, may, by delivering written notice to Landlord within
ten (10) business days of receipt of the notice described in the previous
sentence, either (a) rescind its exercise of Tenant's Cancellation Right, in
which event the Lease, as amended, will continue in full force and effect, or
(b) deliver the applicable Cancellation Payment to Landlord.

        9.      NOTICES TO LANDLORD. Notwithstanding any contrary provision of
Section 29.18 of the Office Lease, Landlord's address for delivery of Notices is
hereby changed to:

        J.P. Morgan Investment Management, Inc.
        522 Fifth Avenue
        12th Floor
        New York, New York 10036
        Attention: Mr. George L. Ochs, Vice President

        and

        Tooley & Company
        1620 26th Street
        Suite 1015N
        Santa Monica, California 90404
        Attention: Building Manager

        With a copy to:

        Allen, Matkins, Leck, Gamble & Mallory
        1999 Avenue of the Stars
        Suite 1800
        Los Angeles, California 90067
        Attention: Anton N. Natsis, Esq.

        10.     LANDLORD'S OPTION AS TO SUBJECT SPACE. Notwithstanding anything
to the contrary contained in Article 14 of the Office Lease, in the event Tenant
contemplates a Transfer of all or a portion of Suite 500 to a person or entity
other than Specialty Laboratories, Tenant shall give Landlord notice (the
"Intention to Transfer Notice") of such contemplated Transfer (whether or not
the contemplated Transferee or the terms of such contemplated Transfer have been
determined). The Intention to Transfer Notice shall specify the portion of and
amount of rentable square feet of Suite 500 which Tenant intends to Transfer
(the "Contemplated Transfer Space"), the contemplated date of commencement of
the Contemplated Transfer (the "Contemplated Effective Date"), and the
contemplated length of the term of such contemplated Transfer, and shall specify
that such Intention to Transfer Notice is delivered to Landlord pursuant to this
Section 10 in order to allow Landlord to elect to recapture the Contemplated
Transfer Space for the term set forth in the Intention to Transfer Notice.
Thereafter, Landlord shall have the option, by giving written notice to Tenant
within thirty (30) days after receipt of


                                      7.
<PAGE>

any Intention to Transfer Notice, to recapture the Contemplated Transfer
Space. In the event such option is exercised by Landlord, the Lease, as
amended by this Third Amendment shall be canceled and terminated with respect
to such Contemplated Transfer Space as of the Contemplated Effective Date
until the last day of the term of the contemplated Transfer as set forth in
the Intention to Transfer Notice. In the event of a recapture by Landlord, if
the Lease, as amended by this Third Amendment shall be canceled with respect
to less than the entire Premises, the Rent reserved herein shall be prorated
on the basis of the number of rentable square feet retained by Tenant in
proportion to the number of rentable square feet contained in the Premises,
and the Lease, as amended by this Third Amendment as so amended shall
continue thereafter in full force and effect, and upon request of either
party, the parties shall execute written confirmation of the same. If
Landlord declines, or fails to timely elect to recapture such Contemplated
Transfer Space under this Section 10, then, subject to the other terms of
Article 14 of the Office Lease, for a period of nine (9) months (the "Nine
Month Period") commencing on the last day of such thirty (30) day period,
Landlord shall not have any right to recapture the Contemplated Transfer
Space with respect to any Transfer made during the Nine Month Period,
provided that any such Transfer is substantially on the terms set forth in
the Intention to Transfer Notice, and provided further that any such Transfer
shall be subject to the remaining terms of Article 14 of the Office Lease. If
such a Transfer is not so consummated within the Nine Month Period (or if a
Transfer is so consummated, then upon the expiration of the term of any
Transfer of such Contemplated Transfer Space consummated within such Nine
Month Period), Tenant shall again be required to submit a new Intention to
Transfer Notice to Landlord with respect any contemplated Transfer, as
provided above in this Section 10.

        11.     HVAC UNIT. At any time during the Lease Term, Tenant may, at
Tenant's sole cost and expense, (i) relocate the approximately forty (40) ton
HVAC Unit (the "HVAC Unit") from the roof of the Adjacent Building, and (ii)
install, in accordance with plans reasonably approved by Landlord, the HVAC Unit
upon the roof of the Building in a location reasonably approved by Landlord,
without the payment of Base Rent or Operating Expenses or any charge for the
same; provided, however, that (1) the HVAC Unit shall be separately metered, at
Tenant's sole cost and expense, for electricity and chilled water consumption,
and Tenant shall pay to Landlord, within thirty (30) days of receipt of written
notice, the cost of the electrical and chilled water usage of such units at the
rates charged by the utility company furnishing the same, including the cost of
the installation, operation, and maintenance of equipment which is installed in
order to supply such excess consumption, as such costs are reasonably determined
by Landlord, and (2) Tenant shall, in connection with Tenant's use of the HVAC
Unit, pay to Landlord, on an annual basis, within thirty (30) days after written
notice from Landlord, (a) the cost incurred by Landlord in connection with the
maintenance contract for the HVAC Unit, and (b) the cost of depreciation of the
HVAC Unit, as reasonably determined by Landlord. Neither Landlord nor any agent
of Landlord has made any representation or warranty regarding the condition of
the HVAC Unit or the suitability of the HVAC Unit for use in connection with the
conduct of Tenant's business. Tenant shall not lease or otherwise make available
such HVAC Unit to any third party (except Specialty Laboratories or an affiliate
of Tenant, as that term is defined in Section 14.5 of the Office Lease). Tenant
shall make any repairs and restorations to the roof of the Adjacent Building
and/or the Building that may be required, in Landlord's reasonable judgment, as
a consequence of such removal and installation of the HVAC Unit. Landlord shall
have no responsibility, obligation or liability of any nature whatsoever with
respect to the HVAC Unit; and Tenant shall protect, defend, and indemnify
Landlord against and


                                      8.
<PAGE>

save Landlord harmless from any and all loss, costs, liability, damage or
expense (including, without limitation, reasonable attorney's fees and costs)
incurred in connection with or in any way arising from (i) the relocation of
the HVAC Unit from the Adjacent Building to the Building, and/or (ii) the
presence of the HVAC Unit on the roof of the Building or the installation,
use, operation, maintenance, repair, replacement or removal thereof by Tenant.

        12.     MONUMENT SIGNAGE. Pursuant to the terms of Section 23.4 of the
Office Lease, effective May 1, 1998, Landlord shall have the right to remove, at
Tenant's expense, Tenant's signage on the Monument.

        13.     LANDLORD'S TERMINATION OPTION. Notwithstanding anything to the
contrary contained in the Lease, as amended, and provided that Specialty
Laboratories has not become the tenant of Suite 500 pursuant to the terms of
Section 8.2, above, effective as of the commencement of the forty-first (41st)
month of the Extended Term and continuing throughout the remainder of the
Extended Term, Landlord shall have the option in its sole and absolute
discretion to deliver written notice (the "Termination Notice") to Tenant
electing to terminate and cancel the Lease, as amended, with respect to Suite
500, effective as of the date (the "Termination Date") set forth in the
Termination Notice (which date shall not be earlier than the last day of the
fifty-third (53rd) month of the Extended Term), provided that Landlord delivers
the Termination Notice to Tenant on or before the date which is at least twelve
(12) months prior to the Termination Date. In the event that Landlord elects to
terminate the Lease, as amended, pursuant to the terms of this Section 13, the
Lease, as amended, with respect to Suite 500, shall expire at midnight on the
Termination Date, and upon such date, Tenant shall vacate and surrender
possession of Suite 500 to Landlord, and Landlord and Tenant shall thereafter be
relieved of their respective obligations under the Lease, as amended, with
respect to Suite 500, except those obligations which specifically survive the
termination of the Lease, as amended, including, without limitation, the payment
by Tenant of all amounts owed by Tenant under the Lease, as amended, with
respect to Suite 500, up to and including the Termination Date.

        14.     DELETIONS. Effective as of February 1, 1999, Sections 1.4, 2.2
and 4.4.4 of the Office Lease are hereby deleted and shall be of no further
force or effect.

        15.     NO OTHER MODIFICATIONS. Except as otherwise provided herein, all
other terms and provisions of the Lease shall remain in full force and effect,
unmodified by this Third Amendment.

        16.     BINDING EFFECT. The provisions of this Third Amendment shall be
binding upon and inure to the benefit of the heirs, representatives, successors
and permitted assigns of the parties hereto.


                                      9.
<PAGE>

        IN WITNESS WHEREOF, the parties have entered into this Third Amendment
as of the date first set forth above.

                              "LANDLORD":

                              WATER GARDEN COMPANY L.L.C., a
                              Delaware Limited Liability Company

                               By:      /s/ George L. Ochs
                                        ----------------------------------------
                                                     George L. Ochs
                                Its:                 Vice President

                              "TENANT"

                              THE RAND CORPORATION, a California non-profit
                              public benefit corporation

                              By:     /s/
                                      -----------------------------------------
                                Its:     Executive Vice President
                                         --------------------------------------

                              By:     /s/ Vivian J. Arterbery
                                      -----------------------------------------
                                Its:     Corporate Secretary
                                         --------------------------------------


                                      10.
<PAGE>

                                   EXHIBIT "B"


                           ADDITIONAL RENT PROVISIONS

                1.1.2   THE BUILDING AND THE PROJECT. The Premises are a part of
the building set forth in Section 4.1 of the Summary (the "Building") located in
Santa Monica, California, which contains approximately 332,656 rentable square
feet of. space. The Building is part of an office project known as "The Water
Garden" which contains another office building located at 2425 West Olympic
Boulevard, Santa Monica, California 90404 (the "Adjacent Building"). The term
"Project," as used in this Lease, shall mean (i) the Building, the Adjacent
Building, and the "Common Areas", as that term is defined in Section 1.1.3
below, (ii) the land (which is improved with landscaping, subterranean parking
facilities and other improvements) upon which the Building, the Adjacent
Building, and the Common Areas are located, and (iii) at Landlord's discretion,
any additional real property, areas, buildings or other improvements added
thereto pursuant to the terms of Section 1.1.4 of this Lease.

                1.1.3   COMMON AREAS. Tenant shall have the non-exclusive right
to use in common with other tenants in the Project, and subject to the rules and
regulations referred to in Article 5 of this Lease, those portions of the
Project which are provided, from time to time, for use in common by Landlord,
Tenant and any other tenants of the Project, whether or not those areas are open
to the general public (such areas, together with such other portions of the
Project designated by Landlord, in its discretion, including certain areas
designated for the exclusive use of certain tenants, or to be shared by Landlord
and certain tenants, such as balconies abutting tenants' premises, are
collectively referred to herein as the "Common Areas"). The Common Areas shall
consist of the "Project Common Areas" and the "Building Common Areas." The term
"Project Common Areas," as used in this Lease, shall mean the portion of the
Project reasonably designated as such by Landlord, and may include, without
limitation, any parking facilities, fixtures, systems, signs, facilities, lakes,
gardens, parks or other landscaping used in connection with the Project, and may
include any city sidewalks adjacent to the Project, pedestrian walkway system,
whether above or below grade, park or other facilities open to the general
public and roadways, sidewalks, walkways, parkways, driveways and landscape
areas appurtenant to the Project. The term "Building Common Areas," as used in
this Lease, shall mean the portions of the Common Areas located within the
Building and may include, without limitation, the common entrances, lobbies,
atrium areas, restrooms, elevators, stairways and accessways, loading docks,
ramps, drives, platforms, passageways, serviceways, common pipes, conduits,
wires, equipment, loading and unloading areas, and trash areas servicing the
Building, designated as such by Landlord. The Common Areas are to be maintained
and operated in a first class manner, and shall be subject to Landlord's
obligations set forth in this Lease. The use of the Common Areas shall be
subject to such rules, regulations and restrictions as Landlord may make from
time to time, as long as such rules, regulations and restrictions do not
unreasonably interfere with the rights granted to Tenant in this Lease and the
permitted use granted under Section 5.1 of this Lease. Except when and where
Tenant's right of access is specifically excluded above and elsewhere in this
Lease, Tenant shall have the right of access to the Premises, the Building, and
the Project parking facility twenty-four (24) hours per day, seven (7) days per
week during the "Lease Term," as that term is defined in Section 2.1 of this
Lease.

<PAGE>

                1.1.4   LANDLORD'S USE AND OPERATION OF THE BUILDING PROJECT AND
COMMON AREAS. Landlord reserves the right from time to time without notice to
Tenant (i) to close temporarily any of the Common Areas; (ii) to make changes to
the Common Areas, including, without limitation, changes in the location, size,
shape and number of street entrances, driveways, ramps, entrances, exits,
passages, stairways and other ingress and egress, direction of traffic,
landscaped areas, loading and unloading areas, and walk-ways; provided, however,
that notwithstanding the foregoing, Landlord shall not remove the water in the
"Phase I" portion of the Project unless required by applicable laws, rules,
ordinances or regulations; (iii) to expand the Building or the Adjacent
Building; (iv) to designate land outside the Project to be part of the Project,
and in connection with the improvement of such land to add additional buildings
and common areas to the Project; provided that, notwithstanding anything to the
contrary contained in this Lease, the Project shall not be expended to include
more than the land located in Santa Monica, California, which has Olympic
Boulevard as its Southern boundary, Cloverfield Boulevard as its Western
boundary, Colorado Avenue as its Northern boundary, and 26th street as its
Eastern boundary (the "Map Area"); (v) to use the Common Areas while engaged in
making additional improvements, repairs or alterations to the Project or to any
adjacent land, or any portion thereof; and (vi) to do and perform such other
acts and make such other changes in, to or with respect to the Project, Common
Areas and Building or the expansion thereof as Landlord may, in the exercise of
sound business judgment, deem to be appropriate. Notwithstanding anything to the
contrary set forth in this Section 1.1.4 above, Landlord shall not take any of
the foregoing actions without the prior consent of Tenant if any such action is
likely to have a material adverse effect on Tenant's use of or access to the
Premises; provided, however, Landlord may take the foregoing actions without the
prior consent of Tenant in the event of an emergency, repairs or compliance with
laws. In the event that any action taken by Landlord pursuant to this Section
1.1.4 is likely to materially adversely affect Tenant's use of or access to the
Premises, Landlord shall provide Tenant with two (2) business days' prior notice
of any such action by Landlord except in the event of emergency, repairs or
compliance with law, in which case Landlord shall give no notice or such notice
as is appropriate under the circumstances. In the event any action taken by
Landlord pursuant to this Section 1.1.4 materially, adversely affects Tenant's
use of or access to the Premises, the terms of Section 19.7.2 of this Lease
shall apply as applicable. Tenant shall approve or disapprove of such action as
set forth in the notice within two (2) business days of its receipt of the same,
which approval shall not be unreasonably withheld. Tenant's failure to approve
or disapprove of such notice within the two (2) business day period described
above shall be deemed Tenant's approval of such notice. If Landlord shall
undertake any new construction of additional buildings within the Map Area, then
Landlord at its sole cost and expense, which shall not be included in "Operating
Expenses," as that term is defined in Section 4.2.3, below, shall take all
commercially reasonable efforts to minimize any inconvenience, noise, dirt,
dust, etc., emanating from such construction.

                1.2     RENTABLE SQUARE FEET AND USABLE SQUARE FEET. For
purposes of this Lease, "rentable square feet" and "usable square feet" shall be
calculated pursuant to Standard Method for Measuring Floor Area in Office
Buildings, ANSI 265.1 - 1980 ("BOMA"), provided that the rentable square footage
of the Building and the other buildings in the Project shall include all of (and
the rentable square footage of the Premises therefore shall include a portion
of) (i) the Building Common Areas and (ii) the occupied space of the portion of
the Project dedicated to the service of the Project, provided that
notwithstanding anything to the contrary set forth in this


                                      2.
<PAGE>

Section 1.2, the rentable square footage of the Premises as measured pursuant
to this Section 1.2, above shall be equal to the product of (A) the usable
square footage of the Premises measured strictly pursuant to BOMA and (B)
1.180. Landlord and Tenant hereby agree that the number of rentable square
feet and usable square feet contained in the Premises initially leased by
Tenant pursuant to this Lease are subject to verification prior to the "Lease
Commencement Date," as that term is defined in Section 2.1, below, by
Landlord's planner/designer and such verification shall be made in accordance
with the provisions of this Article 1. Tenant's architect may consult with
Landlord's planner/designer regarding such verification as it pertains to the
Premises. In the event that Landlord and Tenant disagree as to a precise
measurement pursuant to this Section 1.2, such measurement may be resolved by
appropriate submittal of the same to court proceedings within one (1) year of
the subject measurement. In the event that Landlord's planner/designer
determines that the amount of the rentable square feet or usable square feet
is different from the amount set forth in this Lease, all amounts,
percentages and figures appearing or referred to in this Lease based upon
such incorrect amount (including, without limitation the amount of the
"Rent," as that term is defined in Article 4 of this Lease) shall be modified
in accordance with such determination. If such determination is made, it will
be confirmed in writing by Landlord to Tenant.

                                    ARTICLE 4

                                 ADDITIONAL RENT

                4.1     GENERAL TERMS. As set forth in this Article 4, in
addition to paying the Base Rent specified in Article 3 of this Lease, Tenant
shall pay "Tenant's Share" of the annual "Project Expenses," as those terms are
defined in Sections 4.2.7 and 4.2.4 of this Lease, respectively, allocated to
the tenants of the Building pursuant to the terms of Section 4.3 below, to the
extent such Project Expenses allocated to the tenants of the Building are in
excess or such Project Expenses applicable to the "Base Year," as that term is
defined in Section 4.2.1 of this Lease. Such payments by Tenant, together with
any and all other amounts payable by Tenant to Landlord pursuant to the terms of
this Lease, are hereinafter collectively referred to as the "Additional Rent,"
and the Base Rent and the Additional Rent are sometimes herein collectively
referred to as "Rent." Except as otherwise expressly provided in this Lease to
the contrary, if Base Rent is abated or free Base Rent is granted by Landlord
during the Lease Term, no such abatement or granting of free Base Rent shall
alter or modify Tenant's obligation to pay Additional Rent pursuant to this
Article 4. Without limitation on other obligations of Tenant which survive the
expiration of the Lease Term. the obligations of Tenant to pay the Additional
Rent provided for in this Article 4 shall survive the expiration of the Lease
Term, to the extent same is attributable to the time period prior to the
expiration of the Lease Term. If Tenant disputes that an amount is due and owing
by it pursuant to this Lease, Tenant shall have the right, without waiving any
rights held by it at law or in equity, to pay any such amount under protest and
thereafter to seek recovery of all or any part thereof from Landlord.

                4.2     DEFINITIONS OF KEY TERMS RELATING TO ADDITIONAL RENT. As
used in this Article 4, the following terms shall have the meanings hereinafter
set forth:

                4.2.1   "Base Year" shall mean the period set forth in Section
7.1 of the Summary.


                                      3.
<PAGE>

                4.2.2   "Expense Year" shall mean each calendar year in which
any portion of the Lease Term falls, through and including the calendar year in
which the Lease Term expires, provided that Landlord, upon prior notice to
Tenant, may change the Expense Year from time to time to any other twelve (12)
consecutive-month period, and, in the event of any such change, Tenant's Share
of Project Expenses shall be equitably adjusted for any Expense Year involved in
any such change.

                4.2.3   "Operating Expenses" shall mean all expenses, costs and
amounts of every kind and nature incurred in connection with the ownership,
management, maintenance, repair, replacement, restoration or operation of the
Project, or any portion thereof. Without limiting the generality of the
foregoing, Operating Expenses shall specifically include any and all of the
following: (i) the cost of supplying all utilities, the cost of operating,
maintaining, repairing, complying with conservation measures in connection with,
and managing the utility systems, mechanical systems, sanitary and storm
drainage systems, and elevator systems, and the cost of supplies and equipment,
maintenance, and service contracts incurred in connection therewith; (ii) the
cost of licenses, certificates, permits and inspections and the cost of
contesting the validity or applicability of any governmental enactments which
may affect Operating Expenses, and the personnel costs and expenses incurred in
connection with the implementation and operation of governmentally mandated
transportation system management program or a municipal or public shuttle
service or parking program; (iii) the cost of all insurance carried in
connection with the Project, or any portion thereof to the extent such insurance
is not in excess of that carried by the landlords of Comparable Buildings; (iv)
the cost of landscaping, relamping, and all supplies, tools, equipment and
materials used in the operation, repair and maintenance of the Project, or any
portion thereof; (v) the cost of parking area repair, restoration, and
maintenance, including, but not limited to, resurfacing, repainting, restriping,
and cleaning; (vi) fees, charges and other costs, including consulting fees,
legal fees and accounting fees, of all contractors and consultants; (vii)
payments under any equipment rental agreements or management agreements
(including the cost of any management fee and the fair rental value of any
on-site office space provided thereunder to the extent such office space is not
larger than that provided or used by other landlords of Comparable Buildings in
connection with the management of such buildings); (viii) wages, salaries and
other compensation and benefits of all persons engaged in the operation,
maintenance, management, or security of the Project, or any portion thereof,
including employer's Social Security taxes, unemployment taxes or insurance, and
any other taxes which may be levied an such wages, salaries, compensation and
benefits; provided, that if any employees of the Project provide services for
other projects then a prorated portion of such employees' wages, benefits and
taxes shall be included in Operating Expenses based on the portion of their
working time devoted to the Project, or any portion thereof, and provided
further that no portion of any employee's wages, benefits, or taxes allocable to
time spent on the development or marketing of the Project or the leasing of
space in the Project or elsewhere shall be included in Operating Expenses; (ix)
payments, fees or charges under any easement, license, operating agreement,
declaration, restrictive covenant, or instrument pertaining to the sharing of
costs by the Project, or any portion thereof; (x) the cost of operation, repair
and maintenance of all "Systems and Equipment," as that term is defined in
Section 4.2.5 of this Lease, and components thereof; (xi) the cost of janitorial
services, alarm and security service, window cleaning, trash removal,
replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies,
corridors, restrooms and other common or public areas or facilities, maintenance
and replacement of curbs and walkways, and repair to roofs; (xii) amortization


                                      4.
<PAGE>

(including interest on the unamortized cost) of the cost of acquiring or the
rental expense of personal property used in the maintenance, operation and
repair of the Project, or any portion thereof; (xiii) the cost of any capital
improvements made to the Project which are intended as labor-saving device or to
effect other economies in the operation or maintenance of the Project, or any
portion thereof, to the extent of cost savings reasonably anticipated by
Landlord, or made to the Project, or any portion thereof, after the Lease
Commencement Date that are required under any governmental law or regulation
that was not enacted prior to the date this Lease was fully executed and
delivered or that was not applicable to the Project on the date this Lease was
fully executed and delivered; provided, however, that each such permitted
capital expenditure shall be amortized (including interest on the unamortized
cost) over its useful life as reasonably determined; and (xiv) costs, fees,
charges or assessments imposed by any federal, state or local government for
fire and police protection, trash removal, community services or other services
which do not constitute "Tax Expenses," as that term is defined in Section
4.2.6. If Landlord is not furnishing any particular work or service (the cost of
which, if performed by Landlord, would be included in Operating Expenses) to a
tenant who has undertaken to perform such work or service in lieu of the
performance thereof by Landlord Operating Expenses shall be deemed to be
increased by an amount equal to the additional Operating Expenses which would
reasonably have been incurred during such period by Landlord if it had at its
own expense furnished such work or service to such tenant. If the Project is not
fully occupied during all or a portion of any Expense Year, Landlord shall make
an appropriate adjustment to Operating Expenses for such year employing sound
accounting and management principles, to determine the amount of Operating
Expenses that would have been paid had the Project been fully occupied; and the
amount so determined shall be deemed to have been the amount of Operating
Expenses for such year. Landlord (x) shall not collect or be entitled to collect
from Tenant an amount in excess of Tenant's Share of one hundred percent (100%)
of the Operating Expenses; and (y) shall reduce the amount of the Operating
Expenses by any refund or discount received by Landlord in connection with any
expenses previously included in Operating Expenses. Notwithstanding the
foregoing, for purposes of this Lease, Operating Expenses shall not, except as
otherwise set forth in this Section 4.2, include:

                (A)     bad debt expenses and interest, principal, points and
fees on debts (except in connection with the financing of items which may be
included in Operating Expenses) or amortization on any ground lease, mortgage or
mortgages or any other debt instrument encumbering the Building or the Project
(including the land on which the Building is situated);

                (B)     marketing costs. including leasing commissions,
attorneys' fees in connection with the negotiation and preparation of letters,
decal memos, letters of intent, leases, subleases and/or assignments, space
planning costs, and other costs and expenses incurred in connection with lease,
sublease and/or assignment negotiations and transactions with present or
prospective tenants or other occupants of the Building, including attorneys'
fees and other costs and expenditures incurred in connection with disputes with
present or prospective tenants or other occupants of the Building;

                (C)     real estate brokers' leasing commissions;

                (D)     costs, including permit, license and inspection costs,
incurred with respect to the installation of other tenants' or occupants'
improvements made for tenants or other


                                      5.
<PAGE>

occupants in the Building or incurred in renovating or otherwise improving,
decorating, painting or redecorating vacant space for tenants or other
occupants in the Building;

                (E)     the cost of providing any service directly to and paid
directly by any tenant;

                (F)     any costs expressly excluded from Operating Expenses
elsewhere in this Lease;

                (G)     costs of any items (including, but not limited to, costs
incurred by Landlord for the repair of damage to the Building) to the extent
Landlord receives reimbursement from insurance proceeds (such proceeds to be
deducted from Operating Expenses in the year in which received) or from a third
party (such proceeds to be credited to Operating Expenses in the year in which
received, except that any deductible amount under any insurance policy shall be
included within Operating Expenses);

                (H)     costs of capital improvements, except those set forth in
Section 4.2.3 (xiii) above;

                (I)     rentals and other related expenses for leasing a HVAC
system, elevators, or other items (except when needed in connection with normal
repairs and maintenance of the Building) which if purchased, rather than rented,
would constitute a capital improvement not included in Operating Expenses
pursuant to this Lease;

                (J)     depreciation, amortization and interest payments, except
as specifically included in Operating Expenses pursuant to the terms of this
Lease and except on materials, tools, supplies and vendor-type equipment
purchased by Landlord to enable Landlord to supply services Landlord might
otherwise contract for with a third party, where such depreciation, amortization
and interest payments would otherwise have been included in the charge for such
third party's services, all as determined in accordance with generally accepted
accounting principles, consistently applied, and when depreciation or
amortization is permitted or required, the item shall be amortized over its
reasonably anticipated useful life;

                (K)     costs incurred by Landlord for alterations (including
structural additions), repairs, equipment and tools which are of a capital
nature and/or which are considered capital improvements or replacements under
generally accepted accounting principles, consistently applied, except as
specifically included in Operating Expenses pursuant to the terms of this Lease;

                (L)     expenses in connection with services or other benefits
which are not offered to Tenant or for which Tenant is charged for directly but
which are provided to another tenant or occupant of the Building or Adjacent
Building, without charge;

                (M)     costs incurred by Landlord due to the violation by
Landlord or any tenant of the terms and conditions of any lease of space in the
Building;


                                      6.
<PAGE>

                (N)     overhead and profit increment paid to Landlord or to
subsidiaries or affiliates of Landlord for goods and/or services in the Building
to the extent the same exceeds the costs of such by unaffiliated third parties
on a competitive basis;

                (O)     Landlord's general corporate overhead and general and
administrative expenses;

                (P)     advertising and promotional expenditures, and costs of
signs in or on the Building identifying the owner of the Building or other
tenants' signs;

                (Q)     electric power costs or other utility costs for which
any tenant directly contracts with the local public service company (but
Landlord shall have the right to "gross up" as if the floor was vacant);

                (R)     tax penalties incurred as a result of Landlord's
negligence, inability or unwillingness to make payments or file returns when
due;

                (S)     costs arising from Landlord's charitable or political
contributions;

                (T)     costs arising from earthquake insurance, except to the
extent that Landlord is required to maintain such insurance by law or by its
first mortgage lender and except to the extent carried by landlords of
Comparable Buildings;

                (U)     costs arising from latent defects in the Base, Shell and
Core of the Building or improvements installed by Landlord, excluding the Tenant
Improvements;

                (V)     costs of installing, maintaining and operating any
specialty service operated by Landlord including without limitation, any
luncheon club or athletic facility, or the repair thereof;

                (W)     the amounts of the management fee paid or charged by
Landlord in connection with the management of the Building and the Common Areas
to the extent such management fee is in excess of management fees customarily
paid or charged by landlords of other first-class office buildings in the West
Los Angeles, California area;

                (X)     costs necessitated by or resulting from the negligence
of Landlord, or any of its agents, employees or independent contractors
including, but not limited to, tax penalties incurred as a result of Landlord's
negligence, inability or unwillingness to make payments or file returns when
due;

                (Y)     the amounts of the parking management fee paid by
Landlord in connection with the management of the Project parking facility to
the extent such parking management fee is in excess of parking management fees
customarily paid by landlords of Comparable Buildings; and

                (Z)     expenses incurred in connection with the construction of
all new buildings within the Map Area.


                                      7.
<PAGE>

Notwithstanding anything to the contrary set forth in this Section 4.2.3, for
each Lease Year during the initial Lease Term following the Base Year (but not
applicable to any renewal terms), Tenant's obligation to pay "Controllable
Costs" (as hereinafter defined) shall not increase by an amount greater than ten
percent (10%) per Lease Year, on a cumulative, compounded basis, of the total of
all of the Controllable Costs paid by Tenant. For purposes of this Section
4.2.3, "Controllable Costs" shall include only the following Operating Expenses:

                (i)     Rent (at no greater than fair market rates) on the
management office of the Building (the aggregate size of which management office
shall be limited to no more than 2,000 rentable square feet per each building in
the Project, including the Building, which is serviced by such management
office; provided, however, if the management office servicing the Building also
services any other buildings in the Project in addition to the Building, only
the Building's proportionate share of management office rent shall be deemed to
be an Operating Expense);

                (ii)    Salaries of Building and Project management personnel,
including but not limited to the Building manager, assistant manager, Building
on-site engineers and secretaries; and

                (iii)   Accounting costs.

                4.2.4   "Project Expenses" shall mean the sum of "Operating
Expenses" and "Tax Expenses."

                4.2.5   "Systems and Equipment" shall mean any plant, machinery,
transformers, duct work, conduit, pipe, bus duct, cable, wires, and other
equipment, facilities, and systems designed to supply heat, ventilation, air
conditioning and humidity or any other services or utilities, or comprising or
serving as any component or portion of the electrical, gas, steam, plumbing,
sprinkler, communications, alarm, security, or fire/life safety, systems or
equipment, or any other mechanical, electrical, electronic, computer or other
systems or equipment which serve the Project in whole or in part.

                4.2.6   "Tax Expenses" shall mean all federal, state, county, or
local governmental or municipal taxes, fees, charges or other impositions of
every kind and nature, whether general, special, ordinary or extraordinary
(including, without limitation, real estate taxes, general and special
assessments, transit taxes, leasehold taxes or taxes based upon the receipt of
rent, including gross receipts or sales taxes applicable to the receipt of rent,
unless required to be paid by Tenant, personal property taxes imposed upon the
fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances,
furniture and other personal property used in connection with all or any portion
of the Project), which shall be paid during any Expense Year (without regard to
any different fiscal year used by such governmental or municipal authority)
because of or in connection with the ownership, leasing and operation of the
Project, or any portion thereof.

                4.2.6.1 Tax Expenses shall include, without limitation:

                (i)     Except as otherwise provided in Section 4.4.4 below, any
tax on the rent, right to rent or other income from all or any portion of the
Project or as against the business of leasing the Project, or any portion
thereof;


                                      8.

<PAGE>

                (ii)    Any assessment, tax, fee, levy, or charge in addition
to, or in substitution partially or totally, of any assessment, tax, fee,
levy or charge previously included within the definition of real property
tax, it being acknowledged by Tenant and Landlord that Proposition 13 was
adopted by the voters of the State of California in the June 1978 election
("Proposition 13") and that assessments, taxes, fees, levies and charges may
be imposed by governmental agencies for such services as the protection,
street, sidewalk and road maintenance, refuse removal and for other
governmental services formerly provided without charge to property owners or
occupants, and, in further recognition of the decrease in the level and
quality of governmental services and amenities as a result of Proposition 13,
Tax Expenses shall, except as otherwise provided below, also include any
governmental or private assessments or the Project's contribution towards a
governmental or private cost-sharing agreement for the purpose of augmenting
or improving the quality of services and amenities normally provided by
governmental agencies. It is the intention of Tenant and Landlord that all
such new and increased assessments, taxes, fees, levies, and charges and all
similar assessments, taxes, fees, levies and charges be included within the
definition of Tax Expenses for the purposes of this Lease;

                (iii)   Any assessment, tax, fee, levy, or charge allocable
to or measured by the area of the Premises or the Rent payable hereunder,
including, without limitation, any gross income tax with respect to the
receipt of such rent, or upon or with respect to the possession, leasing,
operating, management, maintenance, alteration, repair, use or occupancy by
Tenant of the Premises, or any portion thereof; and

                (iv)    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.

                4.2.6.2 With respect to any assessment that may be levied
against or upon the Project, or any portion thereof, and that under the laws
then in force may be evidenced by improvement or other bonds, or may be paid
in annual installments, there shall be included within the definition of Tax
Expenses with respect to any tax fiscal year only the amount currently
payable on such bonds, including interest, for such tax fiscal year, or the
current annual installment for such tax fiscal year. All assessments which
may be paid in installments shall be paid by Landlord in the maximum number
of installments permitted by law and not included in Operating Expenses
except in the year in which the assessment is actually paid; provided,
however, that if the prevailing practice in Comparable Buildings is to pay
such assessments on an early basis, and Landlord pays the same on such basis,
such assessments shall be included in Operating Expenses in the year paid by
Landlord.

                4.2.6.3 If (i) the method of valuation or calculation used in
connection with the determination of real estate taxes is changed or altered
or (ii) the method of taxation of real estate prevailing at the time of
execution hereof shall be, or has been, altered, and as a result thereof
there is an increase in taxes now, hereafter or heretofore levied, assessed
or imposed on real estate assessed or imposed upon the owner or owners of the
Project, then such new, altered, or increasing taxes shall be included within
the term "Tax Expenses."


                                          9.

<PAGE>

                4.2.6.4 Any expenses incurred by Landlord in its reasonable
attempts to protest, reduce or minimize Tax Expenses shall be included in Tax
Expenses in the Expense Year such expenses are paid.

                4.2.6.5 Tax refunds shall be credited against Tax Expenses,
and refunded to Tenant, regardless of when received, based on the year to
which the refund is applicable.

                4.2.6.6 If Tax Expenses for any period during the Lease Term
or any extension thereof are increased after payment thereof for any reason,
including, without limitation, error or reassessment by applicable
governmental or municipal authorities, Tenant shall pay within ten (10)
business days of receipt of notice Tenant's Share of such increased Tax
Expenses.

                4.2.6.7 Notwithstanding anything to the contrary contained in
this Section 4.2.6 (except as set forth in Sections 4.2.6.1 and 4.2.6.3,
above), there shall be excluded from Tax Expenses (i) all excess profits
taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal and state income taxes, and other
taxes to the extent applicable to Landlord's general or net income (as
opposed to rents, receipts or income attributable to operations at the
Building), (ii) any items included as Operating Expenses, (iii) any items
paid by Tenant under Section 4.5 of this Lease, and (iv) taxes attributable
to leasehold improvements in excess of the "Cut-Off Point," as that term is
defined in Section 4.5.1 of this Lease.

                4.2.6.8 For purposes of this Lease, Tax Expenses shall be
calculated as if the tenant improvements in the Project were fully
constructed (at a Building standard amount) and the Project (including the
land upon which the Project is located), and all tenant improvements in the
Project were fully assessed for real estate tax purposes, and accordingly,
during the portion of any Expense Year occurring during the Base Year, Tax
Expenses shall be deemed to be increased appropriately.

                4.2.7   "Tenant's Share" shall mean the percentage set forth
in Section 7.2 of the Summary. Tenant's Share was calculated by dividing the
number of rentable square feet of the Premises by the total number of
rentable square feet in the Building. In the event either the rentable square
feet of the Premises and/or the total rentable square feet of the Building is
changed, Tenant's Share shall be appropriately adjusted, and, as to the
Expense Year in which such change occurs, Tenant's Share for such year shall
be determined on the basis of the number of days during such Expense Year
that each such Tenant's Share was in effect.

                4.3     ALLOCATION OF PROJECT EXPENSES TO TENANTS OF THE
BUILDING. Project Expenses (I.E., Operating Expenses and Tax Expenses) are
determined annually for the Project as a whole. Since the Building is only
one of the buildings which constitute the Project, Project Expenses shall be
allocated by Landlord, as provided below, to both the tenants of the Building
and the tenants of the other buildings in the Project. The portion of Project
Expenses allocated to the tenants of the Building shall consist of (i) all
Project Expenses attributable solely to the Building and (ii) an equitable
portion (based upon the total ratio of the number of rentable square feet in
the Building to the total number of rentable square feet in the Project) of
Project Expenses attributable to the Project as a whole and not attributable
solely to the Building, the Adjacent Building or to any other building of the
Project. Additionally, in allocating Project Expenses to


                                          10.

<PAGE>

the tenants of the Building. Landlord shall have the right, from time to
time, to equitably allocate some or all of the Project Expenses allocable to
tenants of the Building among different tenants of the Building (the "Cost
Pools"). Such Cost Pools may include, but shall not be limited to, the office
space tenants of the Building and the retail space tenants of the Building.
Notwithstanding anything to the contrary set forth in this Section 4.3,
Landlord shall include in such Costs Pools all Operating Expenses
attributable to any portion of the Project which is dedicated for the
exclusive use of any tenant of the Project and is not included in the
rentable square footage of the Project.

                4.4     CALCULATION AND PAYMENT OF ADDITIONAL RENT.

                4.4.1   CALCULATION AND PAYMENTS OF ADDITIONAL RENT. For
every Expense Year ending or commencing within the Lease Term, Tenant shall
pay to Landlord, in the manner set forth in Section 4.4.2, below, and as
Additional Rent, an amount equal to Tenant's Share of Project Expenses for
such Expense Year in excess of Tenant's Share of Project Expenses for the
Base Year.

                4.4.2   STATEMENT OF ACTUAL PROJECT EXPENSES AND PAYMENT BY
TENANT. Landlord shall give to Tenant on or before the first day of April
following the end of each Expense Year, a statement (the "Statement") which
Statement shall be itemized on a line-item by line-item basis and shall state
the Project Expenses incurred or accrued for such preceding Expense Year and
the amount thereof allocated to the tenants of the Building, and which shall
indicate the amount, if any, of Tenant's Share of Project Expenses in excess
of Tenant's Share of Project Expenses for the Base Year. Upon receipt of the
Statement for each Expense Year ending during the Lease Term, Tenant shall
pay, upon the later to occur of its next installment of Base Rent due or
within thirty (30) days after receipt of the Statement, the full amount of
Tenant's Share of Project Expenses for such Expense Year in excess of
Tenant's Share of Project Expenses for the Base Year, less the amounts, if
any, paid during such Expense Year as "Estimated Additional Rent," as that
term is defined in Section 4.4.3 below. If the amount of Tenant's Share of
Project Expenses for such Expense Year in excess of Tenant's Share of Project
Expenses for the Base Year is less than the amount paid by Tenant as
Estimated Additional Rent during the applicable period of the Expense Year
(but not including any period of the Expense Year which occurs after the
Lease has terminated), Landlord shall pay the difference to Tenant together
with the applicable Statement, even if the Lease has terminated or expired.
The failure of Landlord to timely furnish the Statement for any Expense Year
shall not prejudice Landlord or Tenant from enforcing its rights under this
Article 4. Even though the Lease Term has expired and Tenant has vacated the
Premises, when the final determination is made of Tenant's Share of Project
Expenses allocated to the tenants of the Building for the Expense Year in
which this Lease terminates, if Tenant's Share of Project Expenses for such
Expense Year is in excess of Tenant's Share of Project Expenses for the Base
Year, then Tenant shall within thirty (30) days of receipt of a Statement
setting forth the amount by which Tenant's Share of Project Expenses for such
Expense Year is in excess of Tenant's Share of Project Expenses for the Base
Year pay to Landlord an amount as calculated pursuant to the provisions of
Section 4.4.1 of this Lease, less any amounts owed from Landlord to Tenant,
provided, however, that Tenant shall not be liable for any Project Expenses,
whenever occurring, unless Tenant is billed for same within two (2) years
following the expiration or earlier termination of this Lease. The provisions
of this Section 4.4.2 shall survive the expiration or earlier termination of
the Lease Term.

                                          11.

<PAGE>


                4.4.3   STATEMENT OF ESTIMATED PROJECT EXPENSES. In addition,
Landlord shall give Tenant a yearly expense estimate statement (the "Estimate
Statement") which Estimate Statement shall be itemized on a line-item by
line-item basis and shall set forth Landlord's reasonable estimate (the
"Estimate") of what the total amount of Project Expenses for the then-current
Expense Year shall be, the amount thereof to be allocated to the tenants of
the Building, and the estimated amount of Tenant's Share of Project Expenses
in excess of Tenant's Share of Project Expenses for the Base Year (the
"Estimated Additional Rent"). The failure of Landlord to timely furnish the
Estimate Statement for any Expense Year shall not preclude Landlord from
enforcing its rights to collect any Estimated Additional Rent under this
Article 4. If pursuant to the Estimate Statement an Estimated Additional Rent
is calculated for the then-current Expense Year, Tenant shall pay, upon the
later to occur of (i) the date upon which its next installment of Base Rent
is due, and (ii) the date which is ten (10) days after Tenant's receipt of
the Statement, a fraction of the Estimated Additional Rent for the
then-current Expense Year (reduced by any amounts paid pursuant to the last
sentence of this Section 4.4.3). Such fraction shall have as its numerator
the number of months which have elapsed in such current Expense Year,
including the month of such payment, and twelve (12) as its denominator.
Until a new Estimate Statement is furnished (which Landlord shall have the
right to deliver to Tenant at any time), Tenant shall pay monthly, with the
monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the
total Estimated Additional Rent set forth in the previous Estimate Statement
delivered by Landlord to Tenant.

                4.4.4   TENANT'S PAYMENT OF CERTAIN TAX EXPENSES.
Notwithstanding anything to the contrary contained in this Lease, in the
event that at any time during the first five (5) Lease Years, any sale,
refinancing, or change in ownership of the Project is consummated, and as a
result thereof, and to the extent that in connection therewith the Project is
reassessed (the "Reassessment") for real estate tax purposes by the
appropriate governmental authority pursuant to the terms of Proposition 13,
then the terms of this Section 4.4.4 shall apply to such Reassessment of the
Project.

                4.4.4.1 THE TAX INCREASE. For purposes of this Article 4, the
term "Tax Increase" shall mean that portion of the Tax Expenses, as
calculated immediately following the Reassessment, which is attributable
solely to the Reassessment; provided, however, that the term Tax Increase
shall not include any portion of the Tax Expenses, as calculated immediately
following the Reassessment, which (i) is attributable to the initial
assessment of the value of the land upon which the Project is located, the
Base, Shell and Core of the Building or the tenant improvements located in
the Building, (ii) is attributable to assessments pending immediately prior
to the Reassessment which assessments were conducted during, and included in,
such Reassessment, or which assessments were otherwise rendered unnecessary
following the Reassessment, or (iii) is attributable to the annual
inflationary increase of real estate taxes permitted to be assessed annually
under Proposition 13.

                4.4.4.2 FIRST FIVE (5) LEASE YEARS. During the first five (5)
Lease Years, Tenant shall not be obligated to pay any portion of the Tax
Increase.

                4.4.4.3 LANDLORD'S RIGHT TO PURCHASE THE PROPOSITION 13
PROTECTION AMOUNT ATTRIBUTABLE TO A PARTICULAR REASSESSMENT. The amount of
Tax Expenses which Tenant is not obligated to pay or will not be obligated to
pay during the Lease Term in connection with a



                                          12.


<PAGE>

particular Reassessment pursuant to the terms of this Section 4.4.4, shall be
sometimes referred to hereafter as a "Proposition 13 Protection Amount." If
the occurrence of a Reassessment is reasonably foreseeable by Landlord and
the Proposition 13 Protection Amount attributable to such Reassessment can be
reasonably quantified or estimated for each Lease Year commencing with the
Lease Year for which the Reassessment first applies, the terms of this
Section 4.4.4.3 shall apply to each such Reassessment. At any time during the
Lease Term, upon thirty (30) days' prior notice to Tenant at any time,
Landlord shall have the right to purchase the Proposition 13 Protection
Amount relating to the applicable Reassessment (the "Applicable
Reassessment"), by paying to Tenant an amount equal to the "Proposition 13
Purchase Price," as that term is defined below, for the Applicable
Reassessment, provided that the right of any successor of Landlord to
exercise its right of repurchase hereunder shall not apply to any
Reassessment which results from the event or transaction (or series of events
or transactions) pursuant to which such successor of Landlord became the
Landlord under this Lease. As used herein, the term "successor of Landlord"
shall include, without limitation, any new or different person or entity that
succeeds to the interest of Landlord under this Lease and to the person or
entity that is currently the Landlord hereunder if such person or entity has
been restructured or reconstituted so as to trigger a Reassessment. As used
herein, "Proposition 13 Purchase Price" for the Applicable Reassessment shall
mean the present value of the Proposition 13 Protection Amount for the
Applicable Reassessment remaining during the Lease Term, as of the date of
payment of such Proposition 13 Purchase Price by Landlord. Such present value
shall be calculated (i) by using the portion of the Proposition 13 Protection
Amount for the Applicable Reassessment attributable to each remaining Lease
Year (assuming for purposes of the computation that the amount of such
Proposition 13 Protection Amount benefited Tenant on an equal monthly basis
at the middle of each month during each Lease Year), as the amounts to be
discounted, and (ii) by using an eight percent (8%) discount rate for each
monthly amount to be discounted. Upon payment of such Proposition 13 Purchase
Price, the provisions of Section 4.4.4.2 of this Lease shall not apply to any
Tax Increase attributable to the Applicable Reassessment. Since Landlord is
estimating the Proposition 13 Purchase Price because a Reassessment has not
yet occurred, when such Reassessment occurs, if Landlord has underestimated
the Proposition 13 Purchase Price, then Tenant's Rent next due shall be
credited with the amount of such underestimation and Landlord shall pay
Tenant, on the next due date for Rent, the amount of any underestimation to
the extent it exceeds the Rent next due hereunder, and if Landlord
overestimates the Proposition 13 Purchase Price, then upon thirty (30) days'
prior notice by Landlord to Tenant, Rent next due shall be increased by the
amount of the overestimation. The amount of any such underestimate or
overestimate shall be calculated by taking the difference between the
Proposition 13 Purchase Price for the Applicable Reassessment actually paid
to Tenant and the Proposition 13 Purchase Price for the Applicable
Reassessment as it should have been computed had all relevant facts
concerning the Applicable Reassessment been known at the time such Purchase
Price was originally computed, and adding interest thereto at a rate per
annum equal to eight percent (8%), compounded annually, from the date such
Purchase Price was paid to Tenant through the date that the amount of the
underestimate or overestimate is to be credited or debited (as the case may
be) against Rent next due hereunder.

                4.5     TAXES AND OTHER CHARGES FOR WHICH TENANT IS DIRECTLY
RESPONSIBLE. Tenant shall reimburse Landlord upon demand for any and all
takes required to be paid by Landlord, excluding state, local and federal
personal or corporate income taxes measured by the


                                          13.


<PAGE>

net income of Landlord from all sources and estate and inheritance taxes,
whether or not now customary or within the contemplation of the parties
hereto, when:

                4.5.1   Said taxes are measured by or are reasonably
attributable to the cost or value of Tenant's equipment, furniture, fixtures
and other personal property located in the Premises, or by the cost or value
of any leasehold improvements made in or to the Premises by or for Tenant, to
the extent the cost or value of such leasehold improvements exceeds the
greater of (i) Thirty-Five Dollars ($35) per rentable square foot of the
Premises, and (ii) the amount per rentable square foot which Landlord is
using as a base value during the Base Year above which Landlord will directly
charge tenants in the Building for Tax Expenses attributable to the cost or
value of leasehold improvements located in such tenants' premises (the
"Cut-Off Point"); provided that any amounts of real estate taxes attributable
to tenant improvements made in or to the Premises or in or to any other
premises in the Building that are in excess of the Cut-Off Point shall not be
included in Tax Expenses;

                4.5.2   Said taxes are assessed upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair,
use or occupancy by Tenant of the Premises or any portion of the Project
(including the Project parking facility); or

                4.5.3   Said taxes are assessed upon this transaction or any
document to which Tenant is a party creating or transferring an interest or
an estate in the Premises.

                4.6     LANDLORD'S BOOKS AND RECORDS.

                Within  two (2) years after receipt of a Statement by Tenant
("Review Period"), if Tenant disputes the amount of Additional Rent set forth
in the Statement, Tenant or an independent certified public accountant (which
accountant is a member of a nationally recognized accounting firm) designated
by Tenant, may, after reasonable notice to Landlord and at reasonable times,
inspect and photocopy Landlord's records at Landlord's offices, provided that
Tenant is not then in Material Default under Section 19.1.1 of this Lease,
provided further that Tenant and such accountant shall, and each of them
shall use their commercially reasonable efforts to cause their respective
agents and employees to, maintain all information contained in Landlord's
records in strict confidence. If after such inspection, Tenant still disputes
such Additional Rent, a certification as to the proper amount shall be made,
at Tenant's expense, by an independent certified public accountant mutually
selected by Landlord and Tenant. Landlord shall cooperate in good faith with
Tenant and its accountant to show Tenant and its accountant the information
upon which the certification is based; provided that if such certification by
Landlord's accountant proves that the Project Expenses set forth in the
Statement were overstated by more than two percent (2.0%), then the cost of
Tenant's accountant and the cost of such certification shall be paid for by
Landlord. Promptly following the parties' receipt of such certification, the
parties shall make such appropriate payments or reimbursements, as the case
may be, to each other, as are determined to be owing pursuant to such
certification, together with interest at the "Interest Rate," as that term is
defined in Article 22 of this Lease, from the date due until paid, in the
case of payments by Tenant to Landlord, or from the date paid until
reimbursed, in the case of reimbursements by Landlord to Tenant. Landlord
shall be required to maintain records of all Project Expenses set forth in
each Statement delivered to Tenant for the entirety of the two (2) year
period following Landlord's delivery of the applicable Statement.



                                          14.


<PAGE>

The payment by Tenant of any amounts pursuant to this Article 4 shall not
preclude Tenant from questioning the correctness of any Statement delivered
by Landlord, provided that the failure of Tenant to object thereto prior to
the expiration of the Review Period shall be conclusively deemed Tenant's
approval of the applicable Statement. In the event that any other tenant in
the Project audits or reviews Project Expenses and an adjustment is made
pursuant to such audit or review because of an error in calculation or in
allocation of Project Expenses, the results of such audit or review shall be
sent to Tenant, within thirty (30) days after Landlord's receipt of Tenant's
written request, in order to allow Tenant to determine whether Tenant is
entitled to a corresponding adjustment pursuant to the terms of this Section
4.6.

                                          15.

<PAGE>




                      SECOND AMENDMENT TO OFFICE LEASE AND
                          CONSENT TO SUBLEASE AGREEMENT

        THIS SECOND AMENDMENT TO OFFICE LEASE AND CONSENT TO SUBLEASE AGREEMENT
(this "Agreement") is made as of July 26, 1996, by and among WATER GARDEN
COMPANY L.L.C., a Delaware limited liability company ("Landlord"), THE RAND
CORPORATION, a California non-profit public benefit corporation ("Tenant"), and
SPECIALTY LABORATORIES, INC., a California corporation ("Subtenant").


                                    RECITALS

                A.      Reference is hereby made to that certain Office Lease
dated January 20, 1993, between Water Garden Associates, a Delaware limited
partnership, Landlord's predecessor-in-interest, as landlord, and Tenant (the
"Original Lease"), as amended by that certain First Amendment to Office Lease
dated as of February 8, 1993, (the "First Amendment"). The Original Lease as
amended by the First Amendment shall be referred to herein as "the Lease."
Pursuant to the Lease, Tenant leases approximately 53,620 rentable square feet
of office space comprising the fifth (5th) and sixth (6th) floors, and certain
Print Facility Space (the "Premises") located in that certain office building
commonly known as 1620 26th Street, Santa Monica, California (the "Building").

                B.      Pursuant to the terms of Article 14 of the Lease, Tenant
has requested Landlord's consent to that certain Sublease, dated July 9, 1996,
between Tenant and Subtenant (the "Sublease"), with respect to a subletting by
Subtenant of a portion of the Premises containing approximately 28,607 rentable
square feet (the "Subleased Premises"). A copy of the Sublease is attached
hereto as Exhibit A. Landlord is willing to consent to the Sublease on the terms
and conditions contained herein. By this Agreement, Landlord and Tenant desire
to modify Article 27(ii) of the Lease as provided herein.

                C.      All defined terms not otherwise expressly defined herein
shall have the respective meanings given in the Lease.


                                    AGREEMENT

                1.      LANDLORD'S CONSENT. Landlord hereby consents to the
Sublease; provided however, notwithstanding anything contained in the Sublease
to the contrary, such consent is granted by Landlord only upon the terms and
conditions set forth in this Agreement. The Sublease is subject and subordinate
to the Lease. Landlord shall not be bound by any of the terms, covenants,
conditions, provisions or agreements of the Sublease, including, without
limitation the following provisions of the Sublease:

                1.1     Section 18.4. Section 18.4 of the Sublease is hereby
amended as follows:

                (a)     The reference to "a minimum of four (4) parking passes
for single and/or tandem unreserved parking spaces" in the second line of
Section 18.4 is hereby deleted in its


<PAGE>

entirety and a reference to "a maximum of four (4) parking passes for single
and/or tandem unreserved parking spaces" is hereby substituted in lieu thereof.

                (b)     The last sentence of Section 18.4 is hereby deleted in
its entirety and the following is substituted in lieu thereof:

                In the event Subtenant requests parking passes in excess of four
                (4) per 1,000 rentable square feet in the Subleased Premises,
                Sublandlord will cooperate with Subtenant in attempting to
                obtain such additional parking passes from the Landlord, in
                Landlord's sole and absolute discretion, and any such additional
                parking passes shall be leased by Subtenant at Landlord's then
                prevailing monthly rates, on a month-to month basis.

                1.2     Section 18.8. The parties hereto hereby acknowledge that
notwithstanding the provisions of Section 18.8 of the Sublease, Tenant shall
retain primary liability to Landlord under Article 16 of the Lease.

                2.      NON-RELEASE OF TENANT; FURTHER TRANSFERS. Neither the
Sublease nor this consent thereto shall release or discharge Tenant from any
liability, whether past, present or future, under the Lease or alter the primary
liability of the Tenant to pay the rent and perform and comply with all of the
obligations of Tenant to be performed under the Lease (including the payment of
all bills rendered by Landlord for charges incurred by the Subtenant for
services and materials supplied to the Premises). Neither the Sublease nor this
consent thereto shall be construed as a waiver of Landlord's right to consent to
any further subletting either by Tenant or by the Subtenant or to any assignment
by Tenant of the Lease or assignment by the Subtenant of the Sublease, or as a
consent to any portion of the Premises being used or occupied by any other
party. Landlord may consent to subsequent sublettings and assignments of the
Lease or the Sublease or any amendments or modifications thereto without
notifying Tenant nor anyone else liable under the Lease and without obtaining
their consent. No such action by Landlord shall relieve such persons from any
liability to Landlord or otherwise with regard to the Premises.

                3.      RELATIONSHIP WITH LANDLORD. Tenant hereby assigns and
transfers to Landlord the Tenant's interest in the Sublease and all rentals and
income arising therefrom, subject to the terms of this SECTION 3. Landlord, by
consenting to the Sublease agrees that until a default shall occur in the
performance of Tenant's obligations under the Lease, Tenant may receive, collect
and enjoy the rents accruing under the Sublease. In the event Tenant shall
default in the performance of its obligations to Landlord under SECTION 19.1 of
the Lease (whether or not Landlord terminates the Lease), however, Landlord may,
in connection with SECTION 19.3 of the Lease, at its option by notice to Tenant,
either (i) terminate the Sublease, (ii) elect to receive and collect, directly
from Subtenant, all rent and any other sums owing and to be owed under the
Sublease, as further set forth in SECTION 3.1, below, or (iii) elect to succeed
to Tenant's interest in the Sublease and cause Subtenant to attorn to Landlord,
as further set forth in SECTION 3.2, below.

                3.1     LANDLORD'S ELECTION TO RECEIVE RENTS. Landlord shall
not, by reason of the Sublease, nor by reason of the collection of rents or any
other sums from the Subtenant pursuant

                                      2.
<PAGE>

to SECTION 3(ii), above, be deemed liable to Subtenant for any failure of Tenant
to perform and comply with any obligation of Tenant, and Tenant hereby
irrevocably authorizes and directs Subtenant, upon receipt of any written notice
from Landlord stating that a default exists in the performance of Tenant's
obligations under the Lease, to pay to Landlord the rents and any other sums due
and to become due under the Sublease. Tenant agrees that Subtenant shall have
the right to rely upon any such statement and request from Landlord, and that
Subtenant shall pay any such rents and any other sums to Landlord without any
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Tenant to the contrary. Tenant
shall not have any right or claim against Subtenant for any such rents or any
other sums so paid by Subtenant to Landlord. Landlord shall credit Tenant with
any rent received by Landlord under such assignment but the acceptance of any
payment on account of rent from the Subtenant as the result of any such default
shall in no manner whatsoever be deemed an attornment by the Landlord to
Subtenant or by Subtenant to Landlord, or a waiver by Landlord of any provision
of the Lease, or serve to release Tenant from any liability under the terms,
covenants, conditions, provisions or agreements under the Lease. Notwithstanding
the foregoing, any other payment of rent from the Subtenant directly to
Landlord, regardless of the circumstances or reasons therefor, shall in no
manner whatsoever be deemed an attornment by the Subtenant to Landlord in the
absence of a specific written agreement signed by Landlord to such an effect.

                3.2     LANDLORD'S ELECTION OF TENANT'S ATTORNMENT. In the event
Landlord elects, at its option, to cause Subtenant to attorn to Landlord
pursuant to SECTION 3(iii), above, Landlord shall undertake the obligations of
Tenant under the Sublease from the time of the exercise of the option, but
Landlord shall not (i) be liable for any prepayment of more than one month's
rent or any security deposit paid by Subtenant, (ii) be liable for any previous
act or omission of Tenant under the Lease or for any other defaults of Tenant
under the Sublease, (iii) be subject to any defenses or offsets previously
accrued which Subtenant may have against Tenant, or (iv) be bound by any changes
or modifications made to the Sublease without the written consent of Landlord.

                4.      GENERAL PROVISIONS.

                4.1     CONSIDERATION FOR SUBLEASE. Tenant and Subtenant
represent and warrant that there are no additional payments of rent or any other
consideration of any type payable by Subtenant to Tenant with regard to the
Subleased Premises other than as disclosed in the Sublease.

                4.2     BROKERAGE COMMISSION. Tenant and Subtenant covenant and
agree that under no circumstances shall Landlord be liable for any brokerage
commission or other charge or expense in connection with the Sublease and Tenant
and Subtenant agree to protect, defend, indemnify and hold Landlord harmless
from the same and from any cost or expense (including but not limited to
attorneys' fees) incurred by Landlord in resisting any claim for any such
brokerage commission.

                4.3     RECAPTURE. This consent shall in no manner be construed
as limiting Landlord's ability to exercise its rights to recapture any portion
of the Premises, as set forth in

                                      3.
<PAGE>

SECTION 14.4 of the Lease, in the event of a proposed future sublease or
assignment of such portion of the Premises.

                4.4     CONTROLLING LAW. The terms and provisions of this
Agreement shall be construed in accordance with and governed by the laws of the
State of California.

                4.5     BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, their heirs, successors and assigns.
As used herein, the singular number includes the plural and the masculine gender
includes the feminine and neuter.

                4.6     CAPTIONS. The paragraph captions utilized herein are in
no way intended to interpret or limit the terms and conditions hereof; rather,
they are intended for purposes of convenience only.

                4.7     PARTIAL INVALIDITY. If any term, provision or condition
contained in this Agreement shall, to any extent, be invalid or unenforceable,
the remainder of this Agreement, or the application of such term, provision or
condition to persons or circumstances other than those with respect to which it
is invalid or unenforceable, shall not be affected thereby, and each and every
other term, provision and condition of this Agreement shall be valid and
enforceable to the fullest extent possible permitted by law.

                4.8     ATTORNEYS' FEES. If either party commences litigation
against the other for the specific performance of this Agreement, for damages
for the breach hereof or otherwise for enforcement of any remedy hereunder, the
parties hereto agree to and hereby do waive any right to a trial by jury and, in
the event of any such commencement of litigation, the prevailing party shall be
entitled to recover from the other party such costs and reasonable attorneys'
fees as may have been incurred.

                4.9     COUNTERPARTS. This Agreement may be executed in multiple
counterparts, all of which shall be deemed originals and with the same effect as
if all parties hereto had signed the same document. All of such counterparts
shall be construed together and shall constitute one instrument, but in making
proof, it shall only be necessary to produce one such counterpart executed by
the party against whom it is being enforced.

                4.10    AMENDMENT TO LEASE. Landlord and Tenant hereby
acknowledge that Article 27(ii) of the Lease is hereby deleted in its entirety
and the following is substituted in lieu thereof:

                "(ii) show the Premises to prospective purchasers, mortgagees or
                ground or underlying lessors, or, to tenants; provided the
                Premises shall only be shown to prospective tenants during the
                last six (6) months of the Lease Term (notwithstanding the
                foregoing, with regard to that portion of the Premises located
                on the fifth (5th) floor of the Building, provided that The Rand
                Corporation is not in occupancy thereof, such portion of the
                Premises may be shown to prospective tenants during the entire
                last year of the Lease Term); . . ."

                                      4.
<PAGE>

Except as modified in this Section 4.10, the Lease shall remain unmodified and
in full force and effect.


                                      5.
<PAGE>



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

                         "Landlord":

                         WATER GARDEN COMPANY L.L.C., a
                         Delaware limited liability company

                          By:     /s/ George L. Ochs
                                  -------------------------------------------
                                                George L. Ochs
                                                Vice President


                         "Tenant":

                         THE RAND CORPORATION, a California non-profit
                          public benefit corporation

                         By:     /s/ Vivian J. Arterbery
                                 -----------------------------------------
                         Its:   Corporate Secretary
                                ------------------------------------------
                                 Vice President
                         By:
                                 -----------------------------------------
                         Its:
                                ------------------------------------------

                         "Subtenant":

                         SPECIALTY LABORATORIES, INC., a California
                         corporation

                         By:     /s/
                                 -----------------------------------------
                         Its:   Chairman
                                ------------------------------------------

                         By:
                                 -----------------------------------------
                         Its:
                                ------------------------------------------

                                      6.