Document:

Exhibit 10.4

                           HUDSON HOLDING CORPORATION

              NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER

      The Board of  Directors  of Hudson  Holding  Corporation  (the  "Company")
hereby  establishes  the  Nominating and Corporate  Governance  Committee of the
Board of Directors with the following purposes,  authority,  powers,  duties and
responsibilities:

1.  Members.  The Board of Directors  shall  appoint a Nominating  and Corporate
Governance  Committee of at least two  "independent"  directors of the Board and
shall  designate  one  member as  chairperson.  "Independent  director"  means a
director  who  meets  the  definition  of  "independence"  under  the  rules and
regulations  of the  Securities  and Exchange  Commission and the American Stock
Exchange, as determined by the Board of Directors. Each member of the Nomination
and Corporate Governance Committee shall be subject to annual reconfirmation and
may be removed by the Board of Directors at any time.

2.  Purposes,   Duties  and  Responsibilities.   The  Nominating  and  Corporate
Governance  Committee  assists the Board of Directors in identifying,  screening
and recommending  qualified  candidates to serve as directors of the Company and
in   maintaining   oversight  of  the  Board  of   Directors'   operations   and
effectiveness.  Specifically,  the Nominating and Corporate Governance Committee
will:

      (a)  Recommend to the Board  candidates  for election or reelection to the
Board at each Annual Meeting of Shareholders of the Company.

      (b)  Recommend to the Board  candidates  for election by the Board to fill
vacancies occurring on the Board.

      (c) Establish  policies and procedures by which  shareholders may nominate
candidates for election as directors.

      (d) Consider shareholders' nominees.

      (e) Make recommendations to the Board concerning the selection criteria to
be used by the Committee in seeking nominees for election to the Board.

      (f) Aid in attracting qualified candidates to serve on the Board.

      (g)  Make   recommendations   to  the  Board   concerning  the  structure,
composition and functioning of the Board and all Board committees.

      (h) Review Board meeting  procedures,  including the  appropriateness  and
adequacy of the  information  supplied to  directors  prior to and during  Board
meetings.

      (i) Review and recommend retirement policies for directors.

<PAGE>

      (j) Review any outside  directorships  in other public  companies  held by
senior company officials.

      (k)  Periodically  receive  and  consider  recommendations  from  the  CEO
regarding succession at the CEO and other senior officer levels.

      (l) Make reports and  recommendations to the Board of Directors within the
scope of its functions.

      (m) Review the Nominating and Corporate  Governance Committee Charter from
time to time and recommend any changes thereto to the Board.

      (n) Prepare a statement each year concerning  compliance by the Nominating
and Corporate  Governance Committee with the Nominating and Corporate Governance
Committee Charter for inclusion in the Company's proxy statement.

3.  Meetings.  The Nominating  and Corporate  Governance  Committee will meet as
often as it deems necessary or appropriate, in its judgment, either in person or
telephonically,  and as such times and places as the Committee  determines.  The
majority of the members of the  Nominating  and Corporate  Governance  Committee
constitute a quorum and shall be  empowered  to act on behalf of the  Nominating
and Corporate  Governance  Committee.  The Nominating  and Corporate  Governance
Committee may, from time to time, delegate authority to subcommittees consisting
of one or more members as it shall deem  appropriate,  subject to such reporting
to or ratification by the Nominating and Corporate  Governance  Committee as the
Nominating and Corporate  Governance  Committee  shall direct.  Minutes shall be
kept of each meeting of the  Nominating and Corporate  Governance  Committee and
any subcommittees thereof.

                                       2Exhibit 10.5

                           HUDSON HOLDING CORPORATION

 COMPLAINT PROCEDURES FOR ACCOUNTING, INTERNAL ACCOUNTING CONTROLS AND AUDITING
                                    MATTERS

     (Adopted by the Audit Committee of the Board of Directors June 27 2006)

      The  Audit   Committee  of  the  Board  of  Directors  of  Hudson  Holding
Corporation  (the "Company")  hereby  establishes  these procedures for: (i) the
receipt,  retention and treatment of complaints regarding  accounting,  internal
accounting controls or auditing matters  (collectively,  "Accounting  Matters"),
and (ii) the confidential,  anonymous submission by employees of the Company and
its subsidiaries of concerns regarding questionable Accounting Matters.

Submission of Complaints:

      Employees  of the Company and its  subsidiaries  with  concerns  regarding
questionable  Accounting  Matters may report their  concerns to the Chair of the
Audit  Committee  of the Board of  Directors  of the  Company  in writing to the
following address:

      Chair of the Audit Committee
      c/o Hudson Holding Corporation
      525 Washington Boulevard
      Jersey City, NJ 07310

      Employees are encouraged to ensure that the submission includes sufficient
information  and  specificity  to allow the Audit Company to act on the reported
concerns. If so desired, employees may report such concerns anonymously.

Scope of Accounting Matters Covered by these Procedures:

      These  procedures  relate to  concerns  and  complaints  about  Accounting
Matters, including, without limitation, the following:

      o     Fraud or error in the  preparation,  evaluation,  review or audit of
            any financial statement of the Company

      o     Fraud or error in the recording or maintaining of financial  records
            of the Company

      o     deficiencies  in  or  non-compliance  with  the  Company's  internal
            accounting controls

      o     misrepresentation  or false  statement to or by a senior  officer or
            accountant  regarding a matter  contained in the financial  records,
            financial reports or audit reports of the Company

      o     any  deviation  from  full  and  fair  reporting  of  the  Company's
            financial condition and/or results of operations

Treatment of Complaints:

      Upon receipt of a complaint,  the Chair of the Audit  Committee  will: (i)
determine whether the complaint  actually pertains to an Accounting  Matter; and
(ii) when  possible,  acknowledge  receipt  of the  complaint  or concern to the
sender.

      The  Audit  Committee  will be  provided  with  copies  of all  complaints
pertaining to Accounting  Matters.  Complaints will be reviewed and investigated
under the  direction  of the Audit  Committee  and the  oversight  by such other
persons   as  the  Audit   Committee   shall   determine   to  be   appropriate.
Confidentiality  will be maintained to the fullest extent  possible,  consistent
with the need to conduct an adequate investigation.

      The Audit  Committee will report to the Board of Directors with respect to
a  complaint  for  which an  investigation  has been  completed,  including  any
corrective action taken or recommended. Prompt and appropriate corrective action
will be taken or recommended to the Board of Directors, when and as warranted in
the judgment of the Audit Committee.

<PAGE>

      The Company will not discharge,  demote,  suspend, harass or in any manner
discriminate  against any  employee in the terms and  conditions  of  employment
based  upon any  lawful  actions  of such  employee  with  respect to good faith
reporting of complaints  regarding  Accounting Matters or otherwise as specified
in Section 806 of the Sarbanes-Oxley Act of 2002.

Retention of Complaints:

      The Chair of the Audit  Committee  shall maintain a log of all complaints,
tracking  their  receipt,  investigation  and  resolution  and  shall  prepare a
periodic  summary report thereof for the Audit  Committee.  Copies of complaints
and  such log will be  maintained  in  accordance  with the  Company's  document
retention policy.

Administration of these Procedures:

      The Audit Committee shall periodically  review and revise these procedures
as necessary or appropriate.  The Audit Committee, in consultation with counsel,
if appropriate,  shall have the authority to make interpretations  regarding the
operation of these procedures.

                                       2Exhibit 10.2

                          MULTI-TENANT INDUSTRIAL LEASE
                          -----------------------------
                                  (TRIPLE NET)
                                    LANDLORD:
                   LBA INDUSTRIAL FUND - HOLDING CO. II, INC.,
                             a Delaware corporation,
                                       and
                            INNSBRUCK HOLDINGS, L.P.,
                        a California limited partnership
                                     TENANT:
                             E.DIGITAL CORPORATION,
                            a California corporation

<PAGE>

               SUMMARY OF BASIC LEASE INFORMATION AND DEFINITIONS
               --------------------------------------------------

This SUMMARY OF BASIC LEASE  INFORMATION AND  DEFINITIONS  ("Summary") is hereby
incorporated into and made a part of the attached Multi-Tenant  Industrial Lease
which pertains to the Building described in Section 1.4 below. All references in
the Lease to the "Lease" shall include this Summary. All references in the Lease
to any term  defined in this  Summary  shall have the  meaning set forth in this
Summary for such term. Any initially  capitalized terms used in this Summary and
any initially  capitalized terms in the Lease which are not otherwise defined in
this Summary shall have the meaning  given to such terms in the Lease.  If there
is any  inconsistency  between this Summary and the Lease, the provisions of the
Lease shall control.

1.1      Landlord's Address:          LBA INDUSTRIAL FUND - HOLDING CO. II, INC.
                                      c/o Layton-Belling & Associates
                                      17901 Von Karman Avenue, Suite 950
                                      Newport Beach, California  92660
                                      Attn: Mr. Steven R. Layton

                                      and

                                      INNSBRUCK HOLDINGS, L.P.
                                      201 Filbert Street, Seventh Floor
                                      San Francisco, California  94133-3298

1.2      Tenant's Address:            13112 Evening Creek Drive, South
                                      San Diego, California 92128
                                      Attn: Robert Putnam
                                      (Prior to the Commencement Date)

                                      16765 W. Bernardo Drive
                                      San Diego, California 92127
                                      Attn: Robert Putnam
                                      (After the Commencement Date)

1.3 Project: The industrial  development known as West Bernardo Business Park in
the City of San Diego, County of San Diego, State of California, as shown on the
site plan attached  hereto as Exhibit "A". The Project  includes all  buildings,
improvements and facilities, now or subsequently located within such development
from time to time,  including,  without  limitation,  the  three  (3)  buildings
(including the Building)  currently  located within the Project,  as depicted on
the  site  plan  attached  hereto  as  Exhibit  "A",  the  address  of  which is
16680-16770  West Bernardo Drive,  San Diego,  California  92127.  The aggregate
rentable  square feet of all of the buildings  (including the Building)  located
within the Project is 73,151  rentable  square feet.  Landlord may, from time to
time, expand or reduce the area comprising the Project.

1.4 Building: A multi-tenant industrial building located in the Project in which
the Premises is located.

1.5 Premises:  Those certain premises within the Project addressed at 16765 West
Bernardo Drive, San Diego,  California  92127,  containing  approximately  4,838
rentable square feet.

1.6  Tenant's  Share:  Tenant's  Share is  6.61%,  which is the  ratio  that the
rentable  square footage of the Premises bears to the rentable square footage of
the Project.  Accordingly,  as more  particularly set forth in Section 4 of this
Lease,  Tenant shall pay to Landlord 6.61% of the Operating  Expenses.  Tenant's
Share is subject to adjustment in accordance with Section 1.3 of this Lease.

1.7  Commencement  Date:  The earlier to occur of (i) the date Tenant  commences
business in the Premises or (ii) the date of Substantial Completion,  as defined
in  accordance  with Exhibit "C".  Landlord  will deliver the Premises to Tenant
upon Substantial Completion, which is estimated to be March 1, 2006.

1.8 Term: Sixty-two (62) months.

1.9 Basic Rent:

                Months                                Basic Rent
                ------                                ----------
                 1-14*                                 $5,805.60**
                 15-27                                 $5,979.77
                 28-38                                 $6,159.16
                 39-50                                 $6,343.94
                 51-62                                 $6,534.25

*Including  any partial month at the  beginning of the Term if the  Commencement
Date is not the first day of the month.
**Subject  to  abatement as provided in Section 3.1 below.

                                       -i-
<PAGE>

1.10 Parking:  Four  uncovered,  unreserved  parking  spaces per 1,000  rentable
square feet of the Premises,  which equals nineteen (19)  uncovered,  unreserved
parking spaces.  Parking will be provided at no additional cost to Tenant, other
than Tenant's Share of Operating Expenses.

1.11 Security Deposit: $31,136.00.

1.12 Permitted Use: General office use.

1.13 Brokers: CB Richard Ellis, Inc. representing Landlord and Tenant.

1.14 Interest  Rate:  The lesser of: (a) the prime rate  announced  from time to
time by Wells  Fargo Bank or, if Wells  Fargo Bank  ceases to exist or ceases to
publish such rate,  then the rate announced from time to time by the largest (as
measured by deposits) chartered  operating bank operating in California,  as its
"prime rate" or "reference  rate",  plus five percent (5%) per annum; or (b) the
maximum rate permitted by law.

1.15 Tenant  Improvements:  The tenant improvements  previously installed in the
Premises,  if any, and the tenant  improvements to be installed in the Premises,
if any, as described in the Tenant Work Letter attached hereto as Exhibit "C".

1.16 Guarantor(s): N/A.

                                      -ii-
<PAGE>

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

                                                                            Page
                                                                            ----
1.       Premises.............................................................1

2.       Term.................................................................1

3.       Rent.................................................................1

4.       Common Area; Operating Expenses......................................2

5.       Security Deposit.....................................................4

6.       Use..................................................................4

7.       Payments and Notices.................................................7

8.       Brokers..............................................................7

9.       Surrender; Holding Over..............................................7

10.      Taxes................................................................8

11.      Possession; Condition of Premises; Repairs...........................8

12.      Alterations..........................................................9

13.      Liens...............................................................10

14.      Assignment and Subletting...........................................10

15.      Entry by Landlord...................................................12

16.      Utilities and Services..............................................12

17.      Indemnification and Exculpation.....................................12

18.      Damage or Destruction...............................................13

19.      Eminent Domain......................................................14

20.      Tenant's Insurance..................................................15

21.      Landlord's Insurance................................................16

22.      Waivers of Subrogation..............................................16

23.      Tenant's Default and Landlord's Remedies............................16

24.      Landlord's Default..................................................19

25.      Subordination.......................................................19

26.      Estoppel Certificate................................................19

27.      Project Planning ("Relocation Notice")..............................20

28.      Modification and Cure Rights of Landlord's Mortgagees and Lessors...20

29.      Quiet Enjoyment.....................................................20

30.      Transfer of Landlord's Interest.....................................20

31.      Limitation on Landlord's Liability..................................20

32.      Miscellaneous.......................................................21

33.      Lease Execution.....................................................23

34.      Waiver of Jury Trial................................................23

EXHIBITS
EXHIBIT "A"   Project Site Plan
EXHIBIT "B"   Intentionally Omitted
EXHIBIT "C"   Work Letter Agreement
EXHIBIT "D"   Sample Form of Notice of Lease Term Dates
EXHIBIT "E"   Rules and Regulations
EXHIBIT "F"   Sample Form of Tenant Estoppel Certificate
EXHIBIT "G"   Intentionally Omitted
EXHIBIT "H"   Tenant Environmental Questionnaire

                                       -i-
<PAGE>

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

                                                                            Page
                                                                            ----
Abandonment..................................................................16
Actual Statement..............................................................3
Collateral...................................................................18
Common Area...................................................................2
Damage Repair Estimate.......................................................14
Declaration...................................................................2
Environmental Law.............................................................5
Environmental Permits.........................................................5
Estimate Statement............................................................3
Force Majeure Delays.........................................................22
Hazardous Materials...........................................................6
Indemnified Claims...........................................................12
Landlord......................................................................1
Landlord Indemnified Parties..................................................5
Landlord's Broker.............................................................7
Lease.........................................................................1
Operating Expenses............................................................2
PCBs..........................................................................6
Permitted Transfer...........................................................11
Permitted Transferee.........................................................11
Pre-Approved Change...........................................................9
Real Property Taxes...........................................................8
Relocation Notice............................................................19
Summary.......................................................................1
Systems.......................................................................9
Tenant........................................................................1
Tenant Change.................................................................9
Tenant Changes,...............................................................9
Tenant's Broker...............................................................7
Tenant's Monthly Operating Expense Charge.....................................3
Tenant's Parties..............................................................5
Termination Notice...........................................................20
Transfer.....................................................................10
Transfer Date................................................................11
Transfer Notice..............................................................11
Transferee...................................................................11

<PAGE>

                                                                         Page(s)
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                          MULTI-TENANT INDUSTRIAL LEASE

This LEASE  ("Lease"),  which  includes  the  preceding  Summary of Basic  Lease
Information and Definitions  ("Summary") attached hereto and incorporated herein
by this reference,  is made as of the 2nd day of March, 2006, by and between LBA
INDUSTRIAL  FUND - HOLDING CO. II, INC., a Delaware  corporation,  and INNSBRUCK
HOLDINGS, L.P., a California limited partnership (collectively, "Landlord"), and
E.DIGITAL CORPORATION, a California corporation ("Tenant").

1. Premises.

1.1  Premises.  Landlord  hereby  leases to Tenant and Tenant hereby leases from
Landlord the Premises upon and subject to the terms,  covenants  and  conditions
contained in this Lease to be performed by each party.

1.2 Landlord's Reservation of Rights. Provided Tenant's use of and access to the
Premises is not interfered with in an unreasonable manner, Landlord reserves the
right from time to time to install, use, maintain,  repair, replace and relocate
pipes,  ducts,  conduits,  wires and appurtenant  meters and equipment above the
ceiling surfaces,  below the floor surfaces and within the walls of the Building
and the Premises.

1.3 Remeasurement.  From time to time at Landlord's option, Landlord's architect
may  determine  and  redetermine  the  actual  rentable  square  footage  of the
Premises,  the Building and other  building(s)  in the  Project,  and  thereupon
Tenant's  Share,  Basic Rent, the  Allowance,  if any, and any other terms which
vary based on the rentable  square footage of the Premises,  the Building and/or
other buildings in the Project, will be adjusted accordingly.

2. Term.

2.1 Term;  Notice of Lease Dates. The Term of this Lease shall be for the period
designated in Section 1.8 of the Summary  commencing on the  Commencement  Date,
and  ending  on the  expiration  of such  period,  unless  the  Term  is  sooner
terminated or extended as provided in this Lease. Notwithstanding the foregoing,
if the Commencement Date falls on any day other than the first day of a calendar
month  then the term of this Lease  will be  measured  from the first day of the
month following the month in which the Commencement Date occurs. Within ten (10)
days  after  Landlord's   written  request,   Tenant  shall  execute  a  written
confirmation  of the  Commencement  Date and expiration  date of the Term in the
form of the Notice of Lease  Term Dates  attached  hereto as  Exhibit  "D".  The
Notice of Lease Term Dates shall be binding upon Tenant  unless  Tenant  objects
thereto in writing within such ten (10) day period.

2.2 Early  Occupancy.  If Tenant occupies the Premises prior to the Commencement
Date,  such early  occupancy shall be subject to all of the terms and conditions
of this Lease, including,  without limitation, the provisions of Sections 17, 20
and 22 except that  provided  Tenant does not commence the operation of business
from the Premises, Tenant will not be obligated to pay rent during the period of
such early occupancy.

3. Rent.

3.1 Basic Rent.  Tenant agrees to pay Landlord,  as basic rent for the Premises,
the Basic Rent designated in Section 1.9 of the Summary. The Basic Rent shall be
paid by Tenant in  advance  on the  first day of each and every  calendar  month
during the Term,  except  that the first full  month's  Basic Rent shall be paid
upon Tenant's  execution and delivery of this Lease to Landlord.  Basic Rent for
any partial  month shall be prorated in the  proportion  that the number of days
this Lease is in effect  during such month bears to the actual number of days in
such  month.  Notwithstanding  anything  to the  contrary  contained  herein and
provided that Tenant faithfully performs all of the terms and conditions of this
Lease,  Landlord hereby agrees to abate Tenant's obligation to pay monthly Basic
Rent for the first two (2) full months of the initial Term of this Lease. During
such abatement periods, Tenant shall still be responsible for the payment of all
of its other monetary obligations under this Lease. In the event of a default by
Tenant under the terms of this Lease that results in early termination  pursuant
to the provisions of Section 23.1 of this Lease,  then as a part of the recovery
set forth in Section  23.2 of this  Lease,  Landlord  shall be  entitled  to the
recovery of the monthly  Basic Rent abated under the  provisions of this Section
3.1.

3.2 Additional  Rent. All amounts and charges payable by Tenant under this Lease
in addition to the Basic Rent described in Section 3.1 above shall be considered
additional  rent for the  purposes  of this  Lease,  and the word "rent" in this
Lease shall  include such  additional  rent unless the context  specifically  or
clearly  implies  that only the Basic  Rent is  referenced.  The Basic  Rent and
additional  rent shall be paid to Landlord as provided in Section 7, without any
prior demand  therefor and without any  deduction or offset,  in lawful money of
the United  States of America.

                                       (1)
<PAGE>

                                                                         Page(s)
                                                                         -------

3.3 Late  Payments.  Late  payments of Basic Rent and/or any item of  additional
rent will be subject to interest  and a late charge as provided in Section  23.7
below.

3.4 Triple-Net  Lease. All rent shall be absolutely net to Landlord so that this
Lease shall  yield net to  Landlord,  the rent to be paid each month  during the
Term of this Lease.  Accordingly,  except as specifically set forth herein,  all
costs,  expenses and obligations of every kind or nature whatsoever  relating to
the Premises, and Tenant's Share of all costs, expenses and obligations of every
kind or nature  whatsoever  relating to the  remaining  portion of the  Project,
which may arise or become due  during  the Term of this  Lease  shall be paid by
Tenant.  Nothing  herein  contained  shall be deemed to require Tenant to pay or
discharge any liens or mortgages of any character  whatsoever which may exist or
hereafter  be placed  upon the  Project by an  affirmative  act or  omission  of
Landlord.

4. Common Area; Operating Expenses.

4.1  Definition  of Common Area.  The term "Common Area" means all areas and the
improvements  thereon within the exterior boundaries of the Project now or later
made  available  for the  general  use of  Landlord,  Tenant  and other  persons
entitled to occupy  floor area in the Project  and their  customers,  including,
without limitation, the parking facilities of the Project, loading and unloading
areas,  trash  areas,  roadways,   sidewalks,   walkways,  parkways,  driveways,
landscaped  areas, and similar areas and facilities  situated within the Project
which are not reserved for the  exclusive use of any Project  occupants.  Common
Area also shall include,  without  limitation,  the common  entrances,  lobbies,
restrooms on multi-tenant floors, elevators,  stairways and accessways,  loading
docks,  ramps,  drives and platforms and any passageways and serviceways thereto
to the extent not exclusively serving another tenant or contained within another
tenant's  premises,  and the  common  pipes,  conduits,  wires  and  appurtenant
equipment serving the Premises.  Without limiting this definition,  Landlord may
include in the Common Area those portions of the Project presently or later sold
or leased to purchasers or tenants,  as the case may be, until the  commencement
of  construction  of the  building(s)  thereon,  at which  time  there  shall be
withdrawn  from the Common Area those areas not provided by such owner or lessee
for common use.  Common  Area shall not  include (i) the  entryway to a tenant's
premises,  (ii) any improvements  installed by a tenant outside of its premises,
whether with or without Landlord's  knowledge or consent,  or (iii) any areas or
facilities that are included in the description of premises leased to a tenant.

4.2  Maintenance  and Use of Common  Area.  The manner in which the Common  Area
shall be  maintained  shall be solely  determined  by Landlord.  If any owner or
tenant of any portion of the Project  maintains  Common  Area  located  upon its
parcel or demised premises (Landlord shall have the right in its sole discretion
to allow any  purchaser  or tenant to so maintain  Common Area  located upon its
parcel or demised premises and to be excluded from  participation in the payment
of  Operating  Expenses  as  provided  below),   Landlord  shall  not  have  any
responsibility for the maintenance of that portion of the Common Area and Tenant
shall have no claims against  Landlord  arising out of any failure of such owner
or tenant to so maintain its portion of the Common Area.  The use and  occupancy
by Tenant of the Premises shall include the right to use the Common Area (except
areas used in the  maintenance  or  operation  of the  Project),  in common with
Landlord  and other  tenants of the Project and their  customers  and  invitees,
subject to (i) any covenants,  conditions and  restrictions  now or hereafter of
record   (collectively   the   "Declaration"),   and   (ii)   such   reasonable,
non-discriminatory  rules  and  regulations  concerning  the  Project  as may be
established by Landlord from time to time  including,  without  limitation,  the
Rules and Regulations  attached hereto as Exhibit "E". Tenant agrees to promptly
comply   with   all   such   rules   and   regulations   and   any   reasonable,
non-discriminatory  amendments  thereto  upon  receipt  of written  notice  from
Landlord.

4.3  Control of and  Changes to Common  Area.  Landlord  shall have the sole and
exclusive  control of the Common Area,  as well as the right to make  reasonable
changes to the Common Area. Provided Landlord does not materially interfere with
Tenant's  use of and access to the  Premises  (except to the extent  required to
comply with law),  Landlord's  rights shall include,  but not be limited to, the
right to (a) restrain the use of the Common Area by  unauthorized  persons;  (b)
cause  Tenant to remove or restrain  persons  from any  unauthorized  use of the
Common Area if they are using the Common Area by reason of Tenant's  presence in
the  Project;  (c) utilize  from time to time any portion of the Common Area for
promotional,  entertainment,  and related  matters;  (d)  temporarily  close any
portion  of the  Common  Area  for  repairs,  improvements  or  alterations,  to
discourage  non-customer  use, to prevent  public  dedication  or an easement by
prescription  from  arising,  or for any  other  reason  deemed  appropriate  in
Landlord's judgment;  and (e) reasonably change the shape and size of the Common
Area, add,  eliminate or change the location of improvements to the Common Area,
including,  without limitation,  buildings,  lighting, parking areas, landscaped
areas, roadways, walkways, drive aisles and curb cuts.

                                       (2)
<PAGE>

                                                                         Page(s)
                                                                         -------

4.4 Operating  Expenses.  Throughout  the Term of this Lease,  commencing on the
Commencement  Date,  Tenant  agrees  to  pay  Landlord  as  additional  rent  in
accordance  with the  terms  of this  Section  4,  Tenant's  Share of  Operating
Expenses.  As used in this Lease, the term "Operating Expenses" shall consist of
all costs and expenses for the  ownership,  operation,  maintenance,  repair and
replacement  of  the  Project  as  determined  by  Landlord  utilizing  standard
accounting  practices and calculated assuming the Project is one hundred percent
(100%) occupied.  Operating Expenses shall include the following costs by way of
illustration  but not  limitation:  (i) Real  Property  Taxes;  (ii) any and all
assessments  under any  covenants,  conditions  and  restrictions  affecting the
Project;  (iii) water, sewer and other utility charges;  (iv) costs of insurance
obtained by Landlord  pursuant to Section 21 of this Lease;  (v) waste  disposal
and janitorial  services;  (vi) security;  (vii) labor;  (viii) management costs
including,  without limitation:  (A) wages, salaries,  pension payments,  fringe
benefits,  uniforms and dry-cleaning  thereof (and payroll taxes,  insurance and
similar charges ) of property  management  employees,  and (B) management office
rental,  supplies,  equipment and related  operating  expenses and  commercially
reasonable  management/administrative  fees; (ix) supplies, materials, equipment
and tools including rental of personal  property;  (x) repair and maintenance of
all  portions of the  buildings  within the  Project,  including  the  plumbing,
heating,  ventilating,  air-conditioning  and  electrical  systems  installed or
furnished by Landlord; (xi) maintenance,  sweeping,  repairs,  resurfacing,  and
upkeep of all parking and other Common Areas;  (xii)  amortization on a straight
line basis over the useful life  (together with interest at the Interest Rate on
the  unamortized  balance)  of  all  capitalized  expenditures  which  are:  (A)
reasonably  intended  to  produce a  reduction  in  operating  charges or energy
consumption;  or (B) required under any  governmental law or regulation that was
not applicable to the Project at the time it was originally constructed;  or (C)
for  replacement  or restoration of any Project  equipment  and/or  improvements
needed to operate  and/or  maintain  the Project at the same  quality  levels as
prior to the replacement or restoration; (xiii) gardening and landscaping; (xiv)
maintenance of signs (other than signs of tenants of the Project); (xv) personal
property taxes levied on or attributable to personal property used in connection
with the Common Areas; (xvi) reasonable accounting,  audit, verification,  legal
and other  consulting  fees; and (xvii) any other costs and expenses of repairs,
maintenance,   painting,   lighting,  cleaning,  and  similar  items,  including
appropriate reserves.

4.5 Tenant's Monthly Operating  Expense Charge.  From and after the Commencement
Date,  Tenant shall pay to  Landlord,  on the first day of each  calendar  month
during the Term of this Lease, Tenant's Share of an amount estimated by Landlord
to be the Monthly  Operating  Expenses for the Project for that month ("Tenant's
Monthly Operating Expense Charge").

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

4.7 Actual Statement. By March 1st of each calendar year during the Term of this
Lease,  Landlord  will also  endeavor to deliver to Tenant a statement  ("Actual
Statement") which states Tenant's Share of the actual Operating Expenses for the
preceding  calendar year. If the Actual Statement reveals that Tenant's Share of
the actual  Operating  Expenses is more than the total  Additional  Rent paid by
Tenant for Operating  Expenses on account of the preceding calendar year, Tenant
agrees to pay  Landlord  the  difference  in a lump sum  within ten (10) days of
receipt of the Actual  Statement.  If the Actual Statement reveals that Tenant's
Share of the actual Operating  Expenses is less than the Additional Rent paid by
Tenant  for  Operating  Expenses  on  account of the  preceding  calendar  year,
Landlord will credit any overpayment  toward the next monthly  installment(s) of
Tenant's Share of the Operating  Expenses due under this Lease.  Such obligation
will  be  a  continuing  one  which  will  survive  the  expiration  or  earlier
termination of this Lease.  Prior to the expiration or sooner termination of the
Lease Term and  Landlord's  acceptance  of Tenant's  surrender of the  Premises,
Landlord will have the right to estimate the actual  Operating  Expenses for the
then  current  calendar  year and to  collect  from  Tenant  prior  to  Tenant's
surrender of the Premises, Tenant's Share of any excess of such actual Operating
Expenses over the estimated  Operating  Expenses paid by Tenant in such calendar
year.

4.8  Miscellaneous.  Any delay or failure by Landlord in delivering any Estimate
Statement or Actual  Statement  pursuant to this Section 4 will not constitute a
waiver of its right to require an  increase  in  additional  rent for  Operating
Expenses nor will it relieve Tenant of its obligations  pursuant to this Section
4, except that Tenant will not be obligated  to make any payments  based on such
Estimate Statement or Actual Statement until ten (10) days after receipt of such
Estimate  Statement  or  Actual  Statement.  If  Tenant  does not  object to any
Estimate  Statement  or Actual  Statement  within  thirty (30) days after Tenant
receives any such statement,  such statement will be deemed final and binding on
Tenant.  Even though the Term has  expired and Tenant has vacated the  Premises,
when the final  determination  is made of Tenant's Share of the actual Operating
Expenses for the year in which this Lease terminates,  Tenant agrees to promptly
pay any increase  due over the  estimated  expenses  paid and,  conversely,  any
overpayment  made in the event said expenses  decrease shall promptly be rebated
by Landlord  to Tenant.  Such  obligation  will be a  continuing  one which will
survive the expiration or termination of this Lease.  Prior to the expiration or
sooner  termination  of the Lease Term and  Landlord's  acceptance  of  Tenant's
surrender of the  Premises,  Landlord will have the right to estimate the actual
Operating Expenses for the then current calendar year and to collect from Tenant
prior to Tenant's  surrender of the  Premises,  Tenant's  Share of any excess of
such actual  Operating  Expenses over the estimated  Operating  Expenses paid by
Tenant in such calendar year.

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5. Security Deposit.  Landlord hereby acknowledges the prior receipt of Eighteen
Thousand Fifty and 00/100 Dollars ($18,050.00),  which was delivered to Landlord
in connection with Tenant's lease of space at 13112 Evening Creek Drive,  South,
San Diego,  California,  and such amount  shall be applied  toward the  Security
Deposit  set forth in Section  1.11 of the Summary  and the  remaining  Thirteen
Thousand  Eighty-Six and 00/100  Dollars  ($13,086.00)  of the Security  Deposit
shall be paid by Tenant concurrent with Tenant's  execution and delivery of this
Lease to Landlord.  The Security  Deposit  shall be held by Landlord as security
for the full and faithful  performance by Tenant of all of the terms,  covenants
and  conditions  of this Lease to be  performed by Tenant  during the Term.  The
Security Deposit is not, and may not be construed by Tenant to constitute,  rent
for the last month or any portion  thereof.  If Tenant  defaults with respect to
any of its obligations under this Lease, Landlord 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 other amount,
loss or damage which  Landlord may spend,  incur or suffer by reason of Tenant's
default.  Tenant hereby waives the  provisions of California  Civil Code Section
1950.7 and any other  provisions  of any law, now or hereafter  enforced,  which
provide  that  Landlord  may claim  from the  Security  Deposit  only those sums
reasonably necessary to remedy defaults in the payment of rent, to repair damage
caused by Tenant or to clean the Premises, it being agreed that Landlord may, in
addition,  claim those sums reasonably  necessary to compensate Landlord for any
other loss or damage  caused by the acts or  omissions of Tenant or any Tenant's
Parties.  If any portion of the Security  Deposit is so used or applied,  Tenant
shall, within ten (10) days after demand therefor, deposit cash with Landlord in
an amount  sufficient  to restore the Security  Deposit to its original  amount.
Landlord  shall not be required to keep the Security  Deposit  separate from its
general  funds,  and Tenant  shall not be entitled  to interest on the  Security
Deposit.  If Tenant shall fully and faithfully  perform every  provision of this
Lease to be performed by it, the Security  Deposit or any balance  thereof shall
be returned to Tenant within two (2) weeks following the expiration of the Lease
term,  provided that Landlord may retain the Security Deposit until such time as
any amount due from Tenant in accordance with this Lease has been determined and
paid in full. If Landlord sells its interest in the Building during the Term and
if  Landlord  deposits  with the  purchaser  the  Security  Deposit  (or balance
thereof),  then,  upon such sale,  Landlord shall be discharged from any further
liability with respect to the Security  Deposit.  If Basic Rent increases during
the Term,  Tenant shall,  within ten (10) days  following  written  request from
Landlord,  deposit additional sums with Landlord so that the total amount of the
Security  Deposit  shall at all times bear the same  proportion to the increased
Basic Rent as the initial Security Deposit bore to the initial Basic Rent.

Notwithstanding the foregoing, provided Tenant is not then in default under this
Lease (and no circumstance  exists that, with the giving of notice,  the passage
of time, or both, would constitute a default) upon the expiration of each of the
twenty-fourth  (24th),  thirty-sixth  (36th),  forty-eighth  (48th) and sixtieth
(60th) full months of the initial Term, the Security Deposit shall be reduced by
an amount  equal Six  Thousand  Five  Hundred  Thirty-Four  and  25/100  Dollars
($6,534.25),  which  amount  shall be  refunded  to  Tenant  promptly  after the
expiration of each applicable month.

6. Use.

6.1  General.  Tenant  shall  use the  Premises  solely  for the  Permitted  Use
specified  in  Section  1.12 of the  Summary,  and shall  not use or permit  the
Premises  to be used for any  other  use or  purpose  whatsoever.  Tenant  shall
observe and comply with the "Rules and  Regulations"  attached hereto as Exhibit
"E", and all reasonable  non-discriminatory  modifications thereof and additions
thereto  from time to time put into effect and  furnished to Tenant by Landlord.
Landlord shall endeavor to enforce the Rules and Regulations,  but shall have no
liability to Tenant for the violation or  non-performance by any other tenant or
occupant of the Project of any such Rules and Regulations.  Tenant shall, at its
sole cost and expense,  observe and comply with all requirements of any board of
fire  underwriters  or similar  body  relating  to the  Premises,  all  recorded
covenants,  conditions and restrictions now or hereafter  affecting the Premises
and all laws,  statutes,  codes, rules and regulations now or hereafter in force
relating  to  or  affecting  the  condition,   use,  occupancy,   alteration  or
improvement of the Premises  (including,  without limitation,  the provisions of
Title III of the  Americans  with  Disabilities  Act of 1990 as it  pertains  to
Tenant's use, occupancy,  improvement and alteration of the Premises),  whether,
except as otherwise  provided  herein,  structural or  nonstructural,  including
unforeseen and/or extraordinary  alterations and/or improvements to the Premises
and regardless of the period of time  remaining in the Lease Term.  Tenant shall
not use or allow the Premises to be used (a) in violation of the  Declaration or
any other recorded covenants,  conditions and restrictions affecting the Project
or of any law or  governmental  rule or  regulation,  or of any  certificate  of
occupancy issued for the Premises,  the Building and/or the Project,  or (b) for
any improper,  immoral,  unlawful or reasonably  objectionable  purpose.  Tenant
shall not do or permit to be done anything which will obstruct or interfere with
the rights of other  tenants or  occupants  of the  Project,  or injure or annoy
them.  Tenant  shall not cause,  maintain or permit any nuisance in, on or about
the Premises,  the Building or the Project, nor commit or suffer to be committed
any waste in, on or about the Premises. Tenant and Tenant's employees and agents
shall not solicit  business in the Common Area, nor shall Tenant  distribute any
handbills or other advertising matter in the Common Area.

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6.2 Parking.

6.2.1 Tenant's Parking Privileges. During the Term of this Lease, Landlord shall
lease to Tenant,  and Tenant  shall lease from  Landlord,  the number of parking
privileges  specified in Section 1.10 of the Summary  hereof for use by Tenant's
employees in the common  parking areas for the Building  within the Project,  as
designated by Landlord from time to time.  Landlord  shall at all times have the
right to establish and modify the nature and extent of the parking areas for the
Building and Project (including whether such areas shall be surface, underground
and/or  other  structures)  as long as Tenant is provided  the number of parking
privileges designated in Section 1.10 of the Summary. In addition, Landlord may,
in its sole discretion,  assign any unreserved and unassigned parking privileges
and/or make all or a portion of such privileges reserved.

6.2.2  Parking  Rules.  The use of the  parking  areas  shall be  subject to the
Parking Rules and  Regulations  contained in Exhibit "E" attached hereto and any
other reasonable,  non-discriminatory  rules and regulations adopted by Landlord
and/or Landlord's parking operators from time to time,  including any system for
controlled  ingress  and  egress  and  charging  visitors  and  invitees,   with
appropriate provision for validation of such charges.  Tenant shall not use more
parking  privileges  than its  allotment  and shall not use any  parking  spaces
specifically assigned by Landlord to other tenants of the Building or Project or
for such other uses as visitor  parking.  Tenant's  parking  privileges shall be
used only for  parking by  vehicles  no larger  than  normally  sized  passenger
automobiles  or pick-up  trucks.  Tenant  shall not permit or allow any vehicles
that belong to or are  controlled  by Tenant or Tenant's  employees,  suppliers,
shippers, customers or invitees to be loaded, unloaded, or parked in areas other
than those  designated  by Landlord for such  activities.  If Tenant  permits or
allows any of the prohibited  activities  described herein,  then Landlord shall
have the right,  without  notice,  in addition to such other rights and remedies
that it may have, to remove or tow away the vehicle involved and charge the cost
thereof to Tenant, which cost shall be immediately payable by Tenant upon demand
by Landlord.

6.3 Signs, Awnings and Canopies. Tenant will not place or suffer to be placed or
maintained  on the roof or on any  exterior  door,  wall or window (or within 48
inches of any window) of the Premises any sign, awning or canopy, or advertising
matter on the glass of any  window or door of the  Premises  without  Landlord's
prior written consent.  Tenant agrees to maintain any such sign, awning, canopy,
decoration,  lettering or  advertising  matter as may be approved by Landlord in
good condition and repair at all times. At the expiration or earlier termination
of this Lease, at Landlord's election,  Tenant shall remove all signs,  awnings,
canopies, decorations,  lettering and advertising and shall repair any damage to
the Building,  the Premises or the Project  resulting  therefrom all at Tenant's
sole cost and  expense.  If Tenant  fails to maintain  any such  approved  sign,
awning,  decoration,  lettering,  or advertising,  Landlord may do so and Tenant
shall reimburse Landlord for such cost plus a twenty percent (20%) overhead fee.
If, without Landlord's prior written consent,  Tenant installs any sign, awning,
decoration, lettering or advertising, or fails to remove any such item(s) at the
expiration or earlier termination of this Lease,  Landlord may have such item(s)
removed and stored and may repair any damage to the  Building,  the  Premises or
the Project at Tenant's expense. The removal,  repair and/or storage costs shall
bear interest until paid at the Interest Rate.

6.4 Hazardous Materials.

6.4.1  Tenant's  Obligations.  Tenant will (i) obtain and maintain in full force
and effect all  Environmental  Permits (as  defined  below) that may be required
from time to time under any Environmental  Laws (as defined below) applicable to
Tenant or the Premises and (ii) be and remain in  compliance  with all terms and
conditions  of all such  Environmental  Permits and with all other  limitations,
restrictions,  conditions, standards, prohibitions,  requirements,  obligations,
schedules  and  timetables  contained in all  Environmental  Laws  applicable to
Tenant or the  Premises.  As used in this Lease,  the term  "Environmental  Law"
means any past,  present or future  federal,  state or local statutory or common
law, or any regulation,  ordinance, code, plan, order, permit, grant, franchise,
concession,  restriction or agreement issued,  entered,  promulgated or approved
thereunder,  relating to (a) the environment, human health or safety, including,
without limitation,  emissions,  discharges,  releases or threatened releases of
Hazardous Materials (as defined below) into the environment (including,  without
limitation,  air,  surface water,  groundwater or land), or (b) the manufacture,
generation,  refining, processing,  distribution, use, sale, treatment, receipt,
storage, disposal, transport,  arranging for transport, or handling of Hazardous
Materials.  "Environmental  Permits" means,  collectively,  any and all permits,
consents,  licenses,  approvals  and  registrations  of any  nature  at any time
required pursuant to, or in order to comply with, any Environmental  Law. Except
for ordinary and general office  supplies,  such as copier toner,  liquid paper,
glue, ink and common household  cleaning materials used and stored in compliance
with all  Environmental  Laws  (some or all of which  may  constitute  Hazardous
Materials as defined below),  Tenant agrees not to cause or permit any Hazardous
Materials to be brought upon,  stored,  used,  handled,  generated,  released or
disposed of on, in, under or about the Premises,  the Building, the Common Areas
or  any  other  portion  of  the  Project  by  Tenant,  its  agents,  employees,
subtenants,   assignees,  licensees,   contractors  or  invitees  (collectively,
"Tenant's  Parties"),  without  the prior  written  consent of  Landlord,  which
consent Landlord may withhold in its sole and absolute discretion.  Concurrently
with the  execution  of this Lease,  Tenant  agrees to  complete  and deliver to
Landlord an  Environmental  Questionnaire  in the form of Exhibit  "H"  attached
hereto.  Upon the expiration or earlier termination of this Lease, Tenant agrees
to promptly remove from the Premises,  the Building and the Project, at its sole
cost and expense,  any and all Hazardous  Materials,  including any equipment or
systems  containing  Hazardous  Materials  which are  installed,  brought  upon,
stored, used,  generated or released upon, in, under or about the Premises,  the
Building  and/or the Project or any portion thereof by Tenant or any of Tenant's
Parties.  To the fullest  extent  permitted  by law,  Tenant  agrees to promptly
indemnify,  protect,  defend and hold harmless Landlord and Landlord's  members,
shareholders,  partners, officers, directors,  employees, agents, successors and
assigns (collectively,  "Landlord Indemnified Parties") from and against any and
all claims, damages,  judgments,  suits, causes of action, losses,  liabilities,
penalties, fines, expenses and costs (including,  without limitation,  clean-up,
removal,  remediation and restoration  costs, sums paid in settlement of claims,
attorneys' fees, consultant fees and expert fees and court costs) which arise or
result  from the  presence of  Hazardous  Materials  on, in,  under or about the
Premises,  the Building or any other portion of the Project and which are caused
or permitted  by Tenant or any of Tenant's  Parties.  Tenant  agrees to promptly
notify  Landlord of any release of  Hazardous  Materials  in the  Premises,  the
Building  or any other  portion of the Project  which  Tenant  becomes  aware of
during the Term of this Lease, whether caused by Tenant, Tenant's Parties or any
other  persons or entities.  In the event of any release of Hazardous  Materials
caused or permitted by Tenant or any of Tenant's  Parties,  Landlord  shall have
the right, but not the obligation, to cause Tenant to immediately take all steps
Landlord  deems  necessary or  appropriate to remediate such release and prevent
any  similar  future  release to the  satisfaction  of Landlord  and  Landlord's
mortgagee(s). At all times during the Term of this Lease, Landlord will have the
right,  but  not  the  obligation,  to  enter  upon  the  Premises  to  inspect,
investigate,  sample  and/or  monitor the  Premises to determine if Tenant is in
compliance with the terms of this Lease regarding  Hazardous  Materials.  Tenant
will,  upon the request of Landlord at any time during which Landlord has reason
to believe that Tenant is not in compliance with this Section 6.4.1, cause to be
performed  an  environmental  audit of the  Premises at  Tenant's  expense by an
established  environmental consulting firm reasonably acceptable to Landlord. As
used in this Lease,  the term "Hazardous  Materials"  shall mean and include any
hazardous  or  toxic  materials,  substances  or  wastes  as  now  or  hereafter
designated or regulated under any law,  statute,  ordinance,  rule,  regulation,
order or ruling of any agency of the State, the United States  Government or any
local  governmental   authority,   including,   without  limitation,   asbestos,
petroleum,   petroleum   hydrocarbons   and  petroleum  based   products,   urea
formaldehyde foam insulation,  polychlorinated biphenyls ("PCBs"), and freon and
other chlorofluorocarbons. The provisions of this Section 6.4.1 will survive the
expiration or earlier termination of this Lease.

                                       (5)
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6.4.2  Landlord's  Termination  Option for Certain  Environmental  Problems.  If
Hazardous   Materials   are  present  at  the  Premises  that  are  required  by
Environmental  Law to be  remediated  and  Tenant  is not  responsible  therefor
pursuant to Section  6.4.1,  Landlord  may, at its option,  either (i) remediate
such  Hazardous  Materials  as an Operating  Expense,  in which event this Lease
shall  continue  in full  force  and  effect  or (ii) if the  estimated  cost to
remediate such Hazardous Materials exceeds twelve (12) times the then Basic Rent
or One Hundred  Thousand  Dollars  ($100,000.00),  whichever  is  greater,  give
written  notice to Tenant,  within thirty (30) days after receipt by Landlord of
knowledge of the existence of such Hazardous Materials,  of Landlord's desire to
terminate  this Lease as of the date sixty (60) days  following the date of such
notice. In the event Landlord elects to give such a termination  notice,  Tenant
may,  within  ten (10) days  thereafter,  give  written  notice to  Landlord  of
Tenant's  commitment to pay the amount by which the cost of the  remediation  of
such Hazardous  Materials  exceeds an amount equal to twelve (12) times the then
Basic Rent or One Hundred Thousand Dollars ($100,000.00),  whichever is greater.
Tenant shall provide Landlord with such funds or satisfactory  assurance thereof
within thirty (30) days following  such  commitment.  In such event,  this Lease
shall continue in full force and effect, and Landlord shall proceed to make such
remediation  as soon  as  reasonably  possible  after  the  required  funds  are
available. If Tenant does not give such notice and provide the required funds or
assurance  thereof within the time provided,  this Lease shall  terminate as the
date specified in Landlord's termination notice.

6.5 Refuse and Sewage.  Tenant agrees not to keep any trash,  garbage,  waste or
other  refuse  on the  Premises  except in  sanitary  containers  and  agrees to
regularly and  frequently  remove same from the Premises.  Tenant shall keep all
containers or other  equipment used for storage of such materials in a clean and
sanitary  condition.  Tenant shall properly  dispose of all sanitary  sewage and
shall not use the sewage  disposal  system for the  disposal of anything  except
sanitary  sewage.  Tenant  shall keep the  sewage  disposal  system  free of all
obstructions  and in good operating  condition.  If the volume of Tenant's trash
becomes  excessive  in  Landlord's  judgment,  Landlord  shall have the right to
charge Tenant for  additional  trash  disposal  services  and/or to require that
Tenant contract directly for additional trash disposal services at Tenant's sole
cost and expense.

6.6 Pest  Control.  Tenant  shall,  at its own cost,  retain a licensed,  bonded
professional pest and sanitation  control service to perform  inspections of the
Premises on an "as needed" basis for the purpose of  eliminating  infestation by
and controlling  the presence of insects,  rodents and vermin and shall promptly
cause any  corrective or  extermination  work  recommended by such service to be
performed.  Such work shall be performed pursuant to a written contract,  a copy
of which shall be delivered to Landlord by Tenant upon request.

6.7 Extraordinary Services. If Landlord incurs Operating Expenses or other costs
for any  increase  in services  provided  to or for the benefit of Tenant  above
those services normally provided by Landlord to the other tenants in the Project
and such increased services or costs result from any act, conduct, extraordinary
use and/or  special  request by Tenant or its  employees  or  customers,  Tenant
agrees  to  reimburse  Landlord  for the costs of such  extraordinary  services,
within  thirty  (30) days of  delivery  to Tenant of  written  invoice  for such
extraordinary  services.  By way of example only, if Tenant should request or if
Tenant's  business  operation should require  extraordinary  security  services,
lighting,  cleaning  and/or repair,  such  extraordinary  services may be billed
directly to Tenant as provided in this  Section 6.7 and shall be  reimbursed  by
Tenant to Landlord as provided herein.

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

8. Brokers.  Landlord has entered into an agreement  with the real estate broker
specified in Section 1.13 of the Summary as representing  Landlord  ("Landlord's
Broker"),  and Landlord  shall pay any  commissions  or fees that are payable to
Landlord's  Broker with respect to this Lease in accordance  with the provisions
of a separate  commission  contract.  Landlord shall have no further or separate
obligation  for payment of  commissions or fees to any other real estate broker,
finder or intermediary.  Tenant represents that it has not had any dealings with
any real estate broker, finder or intermediary with respect to this Lease, other
than Landlord's  Broker and the broker  specified in Section 1.13 of the Summary
as representing Tenant ("Tenant's  Broker").  Any commissions or fees payable to
Tenant's  Broker  with  respect  to this  Lease  shall  be paid  exclusively  by
Landlord's Broker. Each party represents and warrants to the other, that, to its
knowledge,  no other broker,  agent or finder (a) negotiated or was instrumental
in negotiating or consummating  this Lease on its behalf,  or (b) is or might be
entitled to a commission or compensation  in connection with this Lease.  Tenant
shall indemnify,  protect,  defend (by counsel reasonably approved in writing by
Landlord)  and hold  Landlord  harmless  from and  against  any and all  claims,
judgments,  suits, causes of action, damages,  losses,  liabilities and expenses
(including  attorneys' fees and court costs) resulting from any breach by Tenant
of the foregoing representation,  including, without limitation, any claims that
may be asserted against Landlord by any broker,  agent or finder  undisclosed by
Tenant herein. Landlord shall indemnify,  protect, defend (by counsel reasonably
approved in writing by Tenant) and hold Tenant harmless from and against any and
all claims, judgments, suits, causes of action, damages, losses, liabilities and
expenses  (including  attorneys' fees and court costs) resulting from any breach
by Landlord of the foregoing representation,  including, without limitation, any
claims  that may be  asserted  against  Tenant  by any  broker,  agent or finder
undisclosed  by Landlord  herein.  The foregoing  indemnities  shall survive the
expiration or earlier termination of this Lease.

9. Surrender; Holding Over.

9.1 Surrender of Premises.  Upon the  expiration or sooner  termination  of this
Lease, Tenant shall surrender all keys for the Premises to Landlord,  and Tenant
shall deliver  exclusive  possession of the Premises to Landlord broom clean and
in  first-class  condition  and repair,  reasonable  wear and tear excepted (and
casualty  damage  excepted  if this  Lease is  terminated  as a  result  thereof
pursuant to Section  18),  with all of  Tenant's  personal  property  (and those
items, if any, of Tenant  Improvements and Tenant Changes identified by Landlord
pursuant to Section 12.2 below) removed  therefrom and all damage caused by such
removal repaired,  as required pursuant to Sections 12.2 and 12.3 below. If, for
any reason,  Tenant fails to surrender the Premises on the expiration or earlier
termination  of this Lease  (including  upon the  expiration  of any  subsequent
month-to-month  tenancy consented to by Landlord pursuant to Section 9.2 below),
with such removal and repair  obligations  completed,  then,  in addition to the
provisions of Section 9.3 below and Landlord's rights and remedies under Section
12.4 and the other provisions of this Lease,  Tenant shall  indemnify,  protect,
defend (by counsel reasonably approved in writing by Landlord) and hold Landlord
harmless  from and  against  any and all  claims,  judgments,  suits,  causes of
action, damages, losses, liabilities and expenses (including attorneys' fees and
court  costs)  resulting  from such  failure to  surrender,  including,  without
limitation, any claim made by any succeeding tenant based thereon. The foregoing
indemnity shall survive the expiration or earlier termination of this Lease.

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9.2  Holding  Over.  If Tenant  holds  over  after  the  expiration  or  earlier
termination of the Lease Term,  Tenant shall become a tenant at sufferance only,
upon the  terms and  conditions  set  forth in this  Lease so far as  applicable
(including  Tenant's  obligation  to pay all  Operating  Expenses  and any other
additional rent under this Lease), but at a Basic Rent equal to: (a) one hundred
fifty percent  (150%) of the Basic Rent  applicable to the Premises  immediately
prior to the date of such expiration or earlier termination;  or (b) one hundred
fifty percent (150%) of the prevailing market rate excluding any rental or other
concessions (as reasonably determined by Landlord) for the Premises in effect on
the date of such  expiration or earlier  termination.  Acceptance by Landlord of
rent after such expiration or earlier termination shall not constitute a consent
to a hold over  hereunder or result in an extension of this Lease.  Tenant shall
pay a pro-rated  portion of one (1) month's Basic Rent  calculated in accordance
with this  Section  9.2 for any  portion of a month it holds over and remains in
possession of the Premises pursuant to this Section 9.2 (based on the proportion
that the  number of days of such  holdover  bears to the  number of days in such
month).

9.3 No Effect on Landlord's Rights.  The foregoing  provisions of this Section 9
are in addition to, and do not affect, Landlord's right of re-entry or any other
rights of Landlord hereunder or otherwise provided at law or in equity.

10. Taxes.

10.1 Real Property Taxes. Tenant shall pay Tenant's Share of Real Property Taxes
in  accordance  with the  provisions of Section 4. "Real  Property  Taxes" mean,
collectively,   all  general  and  special  real  property  taxes,   assessments
(including,  without  limitation,  change in  ownership  taxes or  assessments),
liens,  bond  obligations,  license  fees or  taxes,  commercial  rent or  gross
receipts taxes, and any similar  impositions in-lieu of other impositions now or
previously within the definition of real property taxes or assessments which may
be levied or assessed by any lawful authority against the Project  applicable to
the period from the Commencement Date until the expiration or sooner termination
of this Lease.  Real Property Taxes are included within Operating  Expenses,  as
set forth in Section 4.4.

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

11. Possession; Condition of Premises; Repairs.

11.1 Delivery of Possession. Landlord will deliver possession of the Premises to
Tenant on the date set forth in Section 1.7 of the Summary; however, if Landlord
cannot  deliver  possession  of the Premises to Tenant by such date,  this Lease
will not be void or voidable, nor will Landlord be liable to Tenant for any loss
or damage  resulting  from such delay.  If the delay in  possession is caused by
Tenant  (including delays caused by Tenant's failure to supply any item referred
to in the following sentence), then the Term and Tenant's obligation to pay rent
will commence as of the date the  Commencement  Date would have occurred but for
Tenant's delay, even though Tenant does not yet have possession. Notwithstanding
the  foregoing,  Landlord  will not be  obligated to deliver  possession  of the
Premises to Tenant until Landlord has received from Tenant all of the following:
(i) a copy of this Lease fully  executed by Tenant and the  guaranty of Tenant's
obligations  under this Lease, if any,  executed by the  Guarantor(s);  (ii) the
Security  Deposit and the first  installment  of Basic Rent; and (iii) copies of
policies of insurance or  certificates  thereof as required  under Section 20 of
this Lease.

11.2  Condition  of  Premises.  Tenant  acknowledges  that,  except as otherwise
expressly  set forth in this Lease,  neither  Landlord nor any agent of Landlord
has made any  representation  or  warranty  with  respect to the  Premises,  the
Building or the Project or their  condition,  or with respect to the suitability
thereof  for the  conduct  of  Tenant's  business  and Tenant  shall  accept the
Premises in their as-is  condition.  The taking of possession of the Premises by
Tenant shall conclusively  establish that the Project, the Premises,  the Tenant
Improvements  therein,  the  Building  and the  Common  Areas  were at such time
complete and in good,  sanitary and  satisfactory  condition and repair with all
work  required to be  performed  by  Landlord,  if any,  pursuant to Exhibit "C"
completed and without any obligation on Landlord's part to make any alterations,
upgrades or improvements thereto.

11.3  Landlord's  Repair  Obligations.  Landlord shall, as part of the Operating
Expenses, repair, maintain and replace, as necessary, (a) the Building shell and
other structural  portions of the Building  (including the roof,  exterior walls
and   foundations),   (b)  the  basic  plumbing,   heating,   ventilating,   air
conditioning, sprinkler and electrical systems within the Building core (but not
any conduits or connections  thereto or distribution  systems thereof within the
Premises or any other tenant's premises or those systems exclusively serving the
Premises  or any  other  tenant's  premises),  and (c) the  Common  Areas of the
Project;  provided,  however,  to  the  extent  such  maintenance,   repairs  or
replacements are required as a result of any act, neglect,  fault or omission of
Tenant or any of Tenant's agents, employees, contractors, licensees or invitees,
Tenant shall pay to Landlord, as additional rent, the costs of such maintenance,
repairs or  replacements.  Landlord shall not be liable to Tenant for failure to
perform any such repairs,  maintenance or  replacements,  unless  Landlord shall
fail to make such repairs,  maintenance or  replacements  and such failure shall
continue  for an  unreasonable  time  following  written  notice  from Tenant to
Landlord of the need therefor. Without limiting the foregoing, Tenant waives the
right to make  repairs at  Landlord's  expense  and/or  terminate  this Lease or
vacate the  Premises  under any law,  statute or  ordinance  now or hereafter in
effect  (including the provisions of California  Civil Code Section  1932(1) and
1942 and any successive sections or statutes of a similar nature).

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11.4 Tenant's Repair Obligations. Except for Landlord's obligations specifically
set forth in Sections 11.3, 18.1 and 19.2 hereof,  Tenant shall at all times and
at Tenant's sole cost and expense,  keep,  maintain,  clean, repair and preserve
and replace, as necessary, the Premises and all parts thereof including, without
limitation,  all Tenant Improvements,  Tenant Changes, utility meters, pipes and
conduits,  all heating,  ventilating and air conditioning systems located within
the Premises or exclusively  serving the Premises,  all fixtures,  furniture and
equipment,  Tenant's  storefront  and signs,  if any,  locks,  closing  devices,
security devices, windows, window sashes, casements and frames, floors and floor
coverings, shelving, restrooms, if any, and any alterations, additions and other
property  located within the Premises in good  condition and repair,  reasonable
wear and tear excepted.  Tenant shall replace, at its expense, any and all plate
and other  glass in and about the  Premises  which is damaged or broken from any
cause  whatsoever  except due to the gross  negligence or willful  misconduct of
Landlord,  its  agents or  employees.  Such  maintenance  and  repairs  shall be
performed with due diligence, lien-free and in a good and workmanlike manner, by
licensed  contractor(s)  which are  selected by Tenant and approved by Landlord,
which approval  Landlord  shall not  unreasonably  withhold or delay.  Except as
otherwise expressly provided in this Lease, Landlord shall have no obligation to
alter, remodel,  improve, repair, renovate,  redecorate or paint all or any part
of the Premises.

12. Alterations.

12.1 Tenant Changes; Conditions.

(a)   Tenant  shall  not  make  any  alterations,   additions,  improvements  or
      decorations  to  the  Premises   (collectively,   "Tenant   Changes,"  and
      individually,  a "Tenant  Change") unless Tenant first obtains  Landlord's
      prior  written  approval  thereof,   which  approval  Landlord  shall  not
      unreasonably  withhold.  Notwithstanding  the foregoing,  Landlord's prior
      approval  shall not be required for any Tenant Change which  satisfies all
      of the following conditions (hereinafter a "Pre-Approved Change"): (i) the
      costs of such Tenant Change does not exceed Five Hundred Dollars ($500.00)
      individually;  (ii) the costs of such Tenant Change when  aggregated  with
      the costs of all other Tenant  Changes  made by Tenant  during the Term of
      this Lease do not exceed Fifteen Hundred Dollars ($1,500.00); (iii) Tenant
      delivers to Landlord final plans,  specifications and working drawings for
      such  Tenant  Change at least ten (10) days prior to  commencement  of the
      work  thereof;  (iv) the Tenant  Change  does not  affect the  mechanical,
      electrical,  plumbing or life safety systems of the Premises, the Building
      and/or the Project (collectively,  the "Systems"),  the roof or structural
      components of the Premises or the exterior of the Premises; (v) the Tenant
      Change does not trigger any legal requirement which would require Landlord
      to make  any  alteration  or  improvement  to the  Premises,  Building  or
      Project;  and (vi) Tenant and such  Tenant  Change  otherwise  satisfy all
      other conditions set forth in this Section 12.1.

(b)   After   Landlord  has   approved   the  Tenant   Changes  and  the  plans,
      specifications  and  working  drawings  therefor  (or is  deemed  to  have
      approved the Pre-Approved  Changes as set forth in Section 12.1(a) above),
      Tenant  shall:  (i) enter into an agreement  for the  performance  of such
      Tenant Changes with licensed and bondable  contractors and  subcontractors
      selected by Tenant and approved by Landlord,  which  approval shall not be
      unreasonably  withheld;  (ii) before  proceeding  with any Tenant  Change,
      provide  Landlord with ten (10) days' prior written  notice  thereof;  and
      (iii) pay to  Landlord,  within ten (10) days after  written  demand,  the
      costs of any increased  insurance premiums incurred by Landlord to include
      such Tenant Changes in the fire and extended coverage  insurance  obtained
      by Landlord pursuant to Section 21 below, if Landlord elects in writing to
      insure such Tenant Changes; provided,  however, that Landlord shall not be
      required  to include  the Tenant  Changes  under such  insurance.  If such
      Tenant  Changes are not  included in  Landlord's  insurance,  Tenant shall
      insure the Tenant Changes under its casualty insurance pursuant to Section
      20.1(a)  below.  In addition,  before  proceeding  with any Tenant Change,
      Tenant's  contractors  shall  obtain,  on behalf of Tenant and at Tenant's
      sole  cost  and  expense:  (A)  all  necessary  governmental  permits  and
      approvals for the commencement  and completion of such Tenant Change;  and
      (B) at Landlord's  request, a completion and lien indemnity bond, or other
      surety,  satisfactory  to  Landlord  for such  Tenant  Change.  Landlord's
      approval of any  contractor(s)  and  subcontractor(s)  of Tenant shall not
      release Tenant or any such contractor(s) and/or  subcontractor(s) from any
      liability   for  any  conduct  or  acts  of  such   contractor(s)   and/or
      subcontractor(s).  Further,  Landlord's approval of Tenant Changes and the
      plans  therefor will create no liability or  responsibility  on Landlord's
      part concerning the  completeness  of same or their design  sufficiency or
      compliance with laws.

(d)   All Tenant Changes shall be performed: (i) in accordance with the approved
      plans,  specifications and working drawings;  (ii) lien-free and in a good
      and  workmanlike  manner;  (iii) in  compliance  with all laws,  rules and
      regulations  of  all  governmental  agencies  and  authorities  including,
      without  limitation,  applicable  building  permit  requirements  and  the
      provisions of Title III of the Americans  with  Disabilities  Act of 1990;
      (iv)  in  such a  manner  so as not to  unreasonably  interfere  with  the
      occupancy  of any other  tenant  in the  Building  or any  other  building
      located  within the Project,  nor impose any  additional  expense upon nor
      delay  Landlord in the  maintenance  and  operation of the Building or any
      other building located within the Project;  and (v) at such times, in such
      manner and subject to such rules and regulations as Landlord may from time
      to time reasonably designate.

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(e)   Throughout the performance of the Tenant Changes,  Tenant shall obtain, or
      cause its  contractors  to  obtain,  workers  compensation  insurance  and
      commercial  general liability  insurance in compliance with the provisions
      of Section 20 of this Lease.

12.2 Removal of Tenant Changes and Tenant  Improvements.  All Tenant Changes and
the initial Tenant  Improvements in the Premises (whether  installed or paid for
by Landlord or Tenant),  shall  become the property of Landlord and shall remain
upon and be surrendered  with the Premises at the end of the Term of this Lease;
provided, however, Landlord may, by written notice delivered to on or before the
expiration  of the Lease Term (or upon any  sooner  termination  of this  Lease)
identify  those items of the Tenant  Changes only which  Landlord  shall require
Tenant  to remove at the end of the Term of this  Lease,  and in no event  shall
Tenant be  required  to remove the  initial  Tenant  Improvements.  If  Landlord
requires  Tenant to remove any such items as described  above,  Tenant shall, at
its sole cost, remove the identified items on or before the expiration or sooner
termination  of this Lease and repair any damage to the Premises  caused by such
removal (or, at Landlord's option, shall pay to Landlord all of Landlord's costs
of such removal and repair).

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

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

13. Liens. Tenant shall not permit any mechanic's,  materialmen's or other liens
to be  filed  against  all or any  part  of the  Project,  the  Building  or the
Premises,  nor against Tenant's leasehold interest in the Premises, by reason of
or in  connection  with any  repairs,  alterations,  improvements  or other work
contracted for or undertaken by Tenant or any other act or omission of Tenant or
Tenant's agents, employees, contractors, licensees or invitees. Tenant shall, at
Landlord's  request,  provide Landlord with  enforceable,  conditional and final
lien releases (and other reasonable evidence reasonably requested by Landlord to
demonstrate  protection  from liens) from all persons  furnishing  labor  and/or
materials  with respect to the  Premises.  Landlord  shall have the right at all
reasonable   times  to  post  on  the   Premises   and  record  any  notices  of
non-responsibility  which it deems  necessary for protection from such liens. If
any such liens are filed, Tenant shall, at its sole cost, immediately cause such
lien to be  released of record or bonded so that it no longer  affects  title to
the Project, the Building or the Premises. If Tenant fails to cause such lien to
be so released or bonded within twenty (20) days after filing thereof,  Landlord
may,  without waiving its rights and remedies based on such breach,  and without
releasing Tenant from any of its obligations,  cause such lien to be released by
any means it shall deem proper,  including  payment in satisfaction of the claim
giving  rise to such lien.  Tenant  shall pay to  Landlord  within five (5) days
after receipt of invoice from Landlord,  any sum paid by Landlord to remove such
liens, together with interest at the Interest Rate from the date of such payment
by Landlord.  Notice is hereby given that  Landlord  shall not be liable for any
labor,  services or materials  furnished  or to be  furnished  to Tenant,  or to
anyone holding the Premises  through or under Tenant,  and that no mechanics' or
other liens for any such labor,  services or materials shall attach to or affect
the interest of Landlord in the Premises.

14. Assignment and Subletting.

14.1  Restriction on Transfer.  Tenant will not assign this Lease in whole or in
part, nor sublet all or any part of the Premises (collectively and individually,
a  "Transfer"),  without the prior  written  consent of Landlord,  which consent
Landlord  will not  unreasonably  withhold.  In no event may Tenant  encumber or
hypothecate  this  Lease.  The consent by  Landlord  to any  Transfer  shall not
constitute  a  waiver  of the  necessity  for  such  consent  to any  subsequent
Transfer.  This  prohibition  against  Transfers shall be construed to include a
prohibition  against any  assignment  or subletting by operation of law. If this
Lease is  transferred  by Tenant,  or if the  Premises  or any part  thereof are
transferred or occupied by any person or entity other than Tenant,  Landlord may
collect rent from the assignee,  subtenant or occupant, and apply the net amount
collected  to the rent  herein  reserved,  but no such  Transfer,  occupancy  or
collection  shall be deemed a waiver on the part of Landlord,  or the acceptance
of the  assignee,  subtenant or occupant as Tenant,  or a release of Tenant from
the further  performance  by Tenant of  covenants  on the part of Tenant  herein
contained  unless  expressly  made in writing by Landlord.  Irrespective  of any
Transfer,  Tenant  shall  remain  fully liable under this Lease and shall not be
released from  performing  any of the terms,  covenants  and  conditions of this
Lease.  Without  limiting in any way Landlord's right to withhold its consent on
any  reasonable  grounds,  it  is  agreed  that  Landlord  will  not  be  acting
unreasonably in refusing to consent to a Transfer if, in Landlord's opinion, (i)
the net worth or financial  capabilities  of such  assignee or subtenant is less
than that of Tenant  and  Guarantor(s)  at the date  hereof,  (ii) the  proposed
assignee or  subtenant  does not have the  financial  capability  to fulfill the
obligations  imposed by the  Transfer,  (iii) the proposed  Transfer  involves a
change of use of the Premises  from that  specified  herein or would violate any
exclusive use covenant to which Landlord is bound, or (iv) the proposed assignee
or  subtenant is not, in  Landlord's  reasonable  opinion,  of reputable or good
character or consistent with Landlord's  desired tenant mix for the Project.  If
Tenant is a corporation, or is an unincorporated association or partnership, the
transfer,  assignment  or  hypothecation  of  any  stock  or  interest  in  such
corporation, association or partnership in the aggregate in excess of forty-nine
percent (49%) shall be deemed an assignment within the meaning and provisions of
this Section 14.1.

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

14.3 Landlord's  Options.  Within fifteen (15) days of Landlord's receipt of any
Transfer Notice, and any additional information requested by Landlord concerning
the proposed Transferee's financial responsibility,  Landlord will notify Tenant
of its election to do one of the following: (i) consent to the proposed Transfer
subject to such  reasonable  conditions as Landlord may impose in providing such
consent; (ii) refuse such consent, which refusal shall be on reasonable grounds;
or (iii) terminate this Lease as to all or such portion of the Premises which is
proposed  to be sublet or  assigned  and  recapture  all or such  portion of the
Premises for reletting by Landlord.

14.4 Additional Conditions. A condition to Landlord's consent to any Transfer of
this Lease will be the delivery to Landlord of a true copy of the fully executed
instrument  of  assignment,  sublease,  transfer or  hypothecation,  in form and
substance reasonably satisfactory to Landlord. Tenant agrees to pay to Landlord,
as  additional  rent,  all sums and other  consideration  payable to and for the
benefit of Tenant by the  Transferee  in excess of the rent  payable  under this
Lease for the same period and portion of the  Premises.  In  calculating  excess
rent or other  consideration which may be payable to Landlord under this Section
14.4,  Tenant  will be entitled to deduct  commercially  reasonable  third party
brokerage  commissions  and  attorneys'  fees and other amounts  reasonably  and
actually  expended by Tenant in connection with such assignment or subletting if
acceptable  written  evidence of such  expenditures is provided to Landlord.  No
Transfer will release Tenant of Tenant's  obligations  under this Lease or alter
the  primary  liability  of  Tenant  to pay the rent and to  perform  all  other
obligations to be performed by Tenant  hereunder.  Landlord may require that any
Transferee  remit directly to Landlord on a monthly basis, all monies due Tenant
by said  Transferee,  and each sublease shall provide that if Landlord gives the
sublessee  written  notice  that  Tenant is in  default  under this  Lease,  the
sublessee will thereafter  make all payments due under the sublease  directly to
or as directed by Landlord, which payments will be credited against any payments
due under this Lease. Tenant hereby irrevocably and  unconditionally  assigns to
Landlord  all rents and other sums payable  under any sublease of the  Premises;
provided,  however,  that Landlord hereby grants Tenant a license to collect all
such rents and other sums so long as Tenant is not in default  under this Lease.
Tenant  shall,  within ten (10) days after the  execution  and  delivery  of any
assignment or sublease,  deliver a duplicate  original copy thereof to Landlord.
Consent by Landlord to one Transfer will not be deemed consent to any subsequent
Transfer.  In the event of default by any  Transferee of Tenant or any successor
of Tenant in the  performance  of any of the terms hereof,  Landlord may proceed
directly  against  Tenant without the necessity of exhausting  remedies  against
such  Transferee  or  successor.  If Tenant  effects a Transfer or requests  the
consent  of  Landlord  to  any  Transfer   (whether  or  not  such  Transfer  is
consummated),  then,  upon demand,  and as a condition  precedent to  Landlord's
consideration  of the  proposed  assignment  or sublease,  Tenant  agrees to pay
Landlord a non-refundable  administrative fee of Five Hundred Dollars ($500.00),
plus Landlord's  reasonable attorneys' fees and other costs incurred by Landlord
in reviewing  such proposed  assignment  or sublease  (whether  attributable  to
Landlord's  in-house  attorneys or paralegals or  otherwise).  Acceptance of the
Five  Hundred  Dollar  ($500.00)  administrative  fee  and/or  reimbursement  of
Landlord's  attorneys' and/or paralegal fees shall in no event obligate Landlord
to consent to any proposed Transfer.  Notwithstanding  any contrary provision of
this  Lease,  if Tenant or any  proposed  Transferee  claims that  Landlord  has
unreasonably withheld or delayed its consent to a proposed Transfer or otherwise
has  breached  its  obligations   under  this  Section  14,  Tenant's  and  such
Transferee's  only  remedy  shall  be to  seek  a  declaratory  judgment  and/or
injunctive  relief, and Tenant, on behalf of itself and, to the extent permitted
by law, such proposed  Transferee  waives all other remedies  against  Landlord,
including without limitation, the right to seek monetary damages or to terminate
this Lease.

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14.5 Permitted  Transfers.  Notwithstanding the provisions of this Section 14 to
the contrary, Tenant may assign this Lease or sublet the Premises or any portion
thereof (herein,  a "Permitted  Transfer"),  without  Landlord's  consent to any
entity that  controls,  is controlled by or is under common control with Tenant,
or to any entity resulting from a merger or consolidation with Tenant, or to any
person or entity which  acquires all the assets of Tenant's  business as a going
concern  (each,  a "Permitted  Transferee"),  provided that: (a) at least twenty
(20) days prior to such assignment or sublease,  Tenant delivers to Landlord the
financial  statements  and other  financial and  background  information  of the
assignee or sublessee as described in Section 14.2 above;  (b) in the case of an
assignment,  the assignee assumes, in full, the obligations of Tenant under this
Lease (or if a  sublease,  the  sublessee  of a portion of the  Premises or Term
assumes,  in full,  the  obligations  of Tenant  with  respect to such  portion)
pursuant to a commercially  reasonable  assumption  agreement,  a fully executed
copy of which is delivered to Landlord  within  twenty (20) days  following  the
effective date of such assignment or subletting;  (c) the financial net worth of
the  assignee or sublessee  equals or exceeds  that of Tenant and any  guarantor
hereof as of the date of  execution  of this  Lease;  (d) Tenant  remains  fully
liable under this Lease; (e) the use of the Premises remains unchanged; (f) such
transaction  is not entered into as a subterfuge to avoid the  restrictions  and
provisions  of this  Section  14;  (g) such  transaction  will not  violate  any
exclusive use covenant or other  agreement to which  Landlord is bound;  and (h)
with respect to a subletting only, Tenant and such Permitted  Transferee execute
Landlord's standard consent to sublease form.

15.  Entry by  Landlord.  Landlord  and its  employees  and agents  shall at all
reasonable  times have the right to enter the  Premises to inspect the same,  to
supply any service  required  to be  provided  by Landlord to Tenant  under this
Lease,  to exhibit the Premises to prospective  lenders or purchasers (or during
the  last  year  of the  Term,  to  prospective  tenants),  to post  notices  of
non-responsibility, and/or to alter, improve or repair the Premises or any other
portion of the  Building,  all without  being deemed guilty of or liable for any
breach of Landlord's  covenant of quiet enjoyment or any eviction of Tenant, and
without  abatement of rent. In  exercising  such entry  rights,  Landlord  shall
endeavor to minimize,  to the extent  reasonably  practicable,  the interference
with Tenant's business, and shall provide Tenant with reasonable advance written
notice of such entry (except in emergency situations and for providing scheduled
services,  if any). Landlord shall have the means which Landlord may deem proper
to open Tenant's doors in an emergency in order to obtain entry to the Premises.
Any entry to the Premises obtained by Landlord by any of said means or otherwise
shall not under any  circumstances  be  construed  or deemed to be a forcible or
unlawful  entry into, or a detainer of, the  Premises,  or an eviction of Tenant
from the  Premises  or any portion  thereof,  or grounds  for any  abatement  or
reduction  of rent and Landlord  shall not have any  liability to Tenant for any
damages or losses on account of any such entry by  Landlord  except,  subject to
the provisions of Section 22.1, to the extent of Landlord's  gross negligence or
willful misconduct.

16.  Utilities and Services.  Tenant shall be solely  responsible  for and shall
promptly pay all charges for heat, air conditioning,  water, gas, electricity or
any other utility used, consumed or provided in, furnished to or attributable to
the Premises at the rates  charged by the  supplying  utility  companies  and/or
Landlord.  Should Landlord elect to supply any or all of such utilities,  Tenant
agrees to purchase and pay for the same as  additional  rent as  apportioned  by
Landlord. The rate to be charged by Landlord to Tenant shall not exceed the rate
charged to Landlord by any supplying  utility.  Tenant shall reimburse  Landlord
within ten (10) days of billing for fixture  charges  and/or water  tariffs,  if
applicable,  which are charged to Landlord by local utility companies.  Landlord
will notify Tenant of this charge as soon as it becomes known.  This charge will
increase or decrease with current  charges being levied  against  Landlord,  the
Premises  or the  Building  by the  local  utility  company,  and will be due as
additional  rent. In no event shall Landlord be liable for any  interruption  or
failure in the supply of any such utility services to Tenant.

17. Indemnification and Exculpation.

17.1 Tenant's Assumption of Risk and Waiver. Except to the extent such matter is
not covered by the  insurance  required to be  maintained  by Tenant  under this
Lease  and such  matter  is  attributable  to the gross  negligence  or  willful
misconduct  of  Landlord,  Landlord  shall  not be liable  to  Tenant,  Tenant's
employees,  agents or invitees for: (i) any damage to property of Tenant,  or of
others, located in, on or about the Premises,  (ii) the loss of or damage to any
property  of  Tenant or of others  by theft or  otherwise,  (iii) any  injury or
damage to persons or property resulting from fire,  explosion,  falling plaster,
steam, gas,  electricity,  water, rain or leaks from any part of the Premises or
from  the  pipes,  appliance  of  plumbing  works or from the  roof,  street  or
subsurface  or from any other  places or by  dampness  or by any other  cause of
whatsoever nature, or (iv) any such damage caused by other tenants or persons in
the Premises,  occupants of adjacent property of the Project,  or the public, or
caused by  operations in  construction  of any private,  public or  quasi-public
work. Landlord shall in no event be liable for any consequential damages or loss
of business or profits and Tenant  hereby waives any and all claims for any such
damages.  All property of Tenant kept or stored on the Premises shall be so kept
or stored at the sole risk of Tenant and Tenant  shall  hold  Landlord  harmless
from any claims arising out of damage to the same, including  subrogation claims
by Tenant's insurance carriers,  unless such damage shall be caused by the gross
negligence or willful  misconduct of Landlord.  Landlord or its agents shall not
be liable for interference with the light or other intangible rights.

17.2 Tenant's Indemnification of Landlord. Tenant shall be liable for, and shall
indemnify,  defend,  protect and hold the Landlord  Indemnified Parties harmless
from and  against,  any and all claims,  damages,  judgments,  suits,  causes of
action,  losses,  liabilities and expenses,  including attorneys' fees and court
costs (collectively,  "Indemnified  Claims"),  arising or resulting from (a) any
occurrence at the Premises  following the date Landlord  delivers  possession of
the  Premises  to  Tenant,  unless  caused by the gross  negligence  or  willful
misconduct of Landlord or its agents,  employees or contractors,  (b) any act or
omission of Tenant or any of Tenant's  Parties;  (c) the use of the Premises and
Common Areas and conduct of Tenant's business by Tenant or any Tenant's Parties,
or any other  activity,  work or thing done,  permitted or suffered by Tenant or
any Tenant's Parties, in or about the Premises, the Building or elsewhere on the
Project; and/or (d) any default by Tenant of any obligations on Tenant's part to
be  performed  under the terms of this  Lease or the  terms of any  contract  or
agreement  to which  Tenant is a party or by which it is bound,  affecting  this
Lease or the  Premises.  In case any action or  proceeding  is  brought  against
Landlord or any Landlord  Indemnified  Parties by reason of any such Indemnified
Claims,  Tenant,  upon notice from  Landlord,  shall defend the same at Tenant's
expense by counsel approved in writing by Landlord,  which approval shall not be
unreasonably withheld.

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17.3 Survival; No Release of Insurers. Tenant's indemnification obligation under
Section 17.2, shall survive the expiration or earlier termination of this Lease.
Tenant's  covenants,  agreements and  indemnification  in Sections 17.1 and 17.2
above,  are not intended to and shall not relieve any  insurance  carrier of its
obligations  under  policies  required to be carried by Tenant,  pursuant to the
provisions of this Lease.

18. Damage or Destruction.

18.1 Landlord's Rights and Obligations. In the event the Premises are damaged by
fire or other casualty to an extent not exceeding  twenty-five  percent (25%) of
the full  replacement  cost thereof,  and Landlord's  contractor  estimates in a
writing  delivered  to the  parties  that the  damage  thereto  is such that the
Premises  may be  repaired,  reconstructed  or  restored  to  substantially  its
condition  immediately prior to such damage within one hundred twenty (120) days
from the date of such  casualty,  and Landlord will receive  insurance  proceeds
sufficient to cover the costs of such repairs,  reconstruction  and  restoration
(including  proceeds  from Tenant  and/or  Tenant's  insurance  which  Tenant is
required to deliver to Landlord  pursuant to Section 18.2 below),  then Landlord
shall commence and proceed  diligently  with the work of repair,  reconstruction
and  restoration  and this Lease shall  continue  in full force and effect.  If,
however,  the Premises are damaged to an extent  exceeding  twenty-five  percent
(25%) of the full replacement cost thereof, or Landlord's  contractor  estimates
that such work of repair,  reconstruction  and  restoration  will require longer
than one hundred  twenty  (120) days to complete,  or Landlord  will not receive
insurance  proceeds (and/or proceeds from Tenant,  as applicable)  sufficient to
cover the costs of such repairs,  reconstruction and restoration,  then Landlord
may elect to either:

(a)   repair,  reconstruct  and restore the portion of the  Premises  damaged by
      such casualty (including the Tenant Improvements,  the Tenant Changes that
      Landlord  elects to insure  pursuant to Section 12.1(b) and, to the extent
      of insurance proceeds received from Tenant, the Tenant Changes that Tenant
      insures  pursuant to Section 12.1(b) and/or  20.1(a)),  in which case this
      Lease shall continue in full force and effect; or

(b)   terminate  this Lease  effective  as of the date which is thirty (30) days
      after Tenant's receipt of Landlord's election to so terminate.

Under any of the  conditions of this Section 18.1,  Landlord  shall give written
notice to Tenant of its  intention  to repair or  terminate  within the later of
sixty (60) days after the  occurrence  of such  casualty,  or fifteen  (15) days
after Landlord's receipt of the estimate from Landlord's contractor.

18.2  Tenant's  Costs and  Insurance  Proceeds.  In the  event of any  damage or
destruction of all or any part of the Premises,  Tenant shall  immediately:  (a)
notify  Landlord  thereof;  and (b) deliver to Landlord all  insurance  proceeds
received by Tenant with respect to the Tenant Improvements and Tenant Changes in
the  Premises to the extent such items are not  covered by  Landlord's  casualty
insurance obtained by Landlord pursuant to Section 21 below (excluding  proceeds
for Tenant's furniture and other personal  property),  whether or not this Lease
is  terminated  as permitted in this  Section 18, and Tenant  hereby  assigns to
Landlord  all  rights to receive  such  insurance  proceeds.  If, for any reason
(including Tenant's failure to obtain insurance for the full replacement cost of
any Tenant  Changes  which  Tenant is  required  to insure  pursuant to Sections
12.1(b)  and/or  20.1(a)  hereof),  Tenant fails to receive  insurance  proceeds
covering the full  replacement  cost of such Tenant  Changes  which are damaged,
Tenant shall be deemed to have  self-insured the replacement cost of such Tenant
Changes,  and upon any damage or destruction  thereto,  Tenant shall immediately
pay to Landlord  the full  replacement  cost of such items,  less any  insurance
proceeds  actually  received by Landlord from  Landlord's or Tenant's  insurance
with respect to such items.

18.3  Abatement  of Rent.  In the  event  that as a result  of any such  damage,
repair,  reconstruction and/or restoration of the Premises,  Tenant is prevented
from using, and does not use, the Premises or any portion thereof, then the rent
shall be abated or  reduced,  as the case may be,  during the period that Tenant
continues to be so prevented from using and does not use the Premises or portion
thereof,  in the proportion  that the rentable square feet of the portion of the
Premises  that Tenant is prevented  from using,  and does not use,  bears to the
total rentable square feet of the Premises. Notwithstanding the foregoing to the
contrary, if the damage is due to the negligence or willful misconduct of Tenant
or any  Tenant's  Parties,  there  shall be no  abatement  of rent.  Except  for
abatement of rent as provided  hereinabove,  Tenant shall not be entitled to any
compensation or damages for loss of, or interference with,  Tenant's business or
use or access of all or any part of the Premises resulting from any such damage,
repair, reconstruction or restoration.

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18.4 Inability to Complete.  Notwithstanding  anything to the contrary contained
in this Section 18, if Landlord is  obligated  or elects to repair,  reconstruct
and/or  restore the damaged  portion of the  Premises  pursuant to Section  18.1
above,  but is  delayed  from  completing  such  repair,  reconstruction  and/or
restoration  beyond the date which is six (6) months after the date estimated by
Landlord's contractor for completion thereof pursuant to Section 18.1, by reason
of any causes  beyond the  reasonable  control of Landlord  (including,  without
limitation,  any delay due to Force  Majeure as defined  in Section  32.16,  and
delays  caused by Tenant or any Tenant's  Parties),  then  Landlord may elect to
terminate this Lease upon thirty (30) days' prior written notice to Tenant.

18.5 Damage to the Project.  If there is a total destruction of the Project or a
partial  destruction  of the  Project,  the cost of  restoration  of which would
exceed  one-third  (1/3) of the then  replacement  value of the Project,  by any
cause whatsoever, whether or not insured against and whether or not the Premises
are partially or totally destroyed,  Landlord may within a period of one hundred
eighty (180) days after the  occurrence  of such  destruction,  notify Tenant in
writing that it elects not to so  reconstruct  or restore the Project,  in which
event this Lease shall cease and terminate as of the date of such destruction.

18.6 Damage Near End of Term. In addition to its termination  rights in Sections
18.1 and 18.4 above,  Landlord  shall have the right to terminate  this Lease if
any damage to the Building or Premises occurs during the last twelve (12) months
of the Term of this  Lease  and  Landlord's  contractor  estimates  in a writing
delivered to the parties that the repair,  reconstruction or restoration of such
damage cannot be completed  within the earlier of (a) the  scheduled  expiration
date of the Lease Term, or (b) sixty (60) days after the date of such casualty.

18.7 Tenant Termination  Right.  Within thirty (30) days after the date Landlord
learns of the  necessity  for  repairs  as a result  of damage to the  Premises,
Landlord shall notify Tenant ("Damage Repair Estimate") of Landlord's  estimated
assessment of the period of time in which the repairs will be  completed,  which
assessment shall be based upon the opinion of a contractor  reasonably  selected
by Landlord and experienced in comparable repairs of high-rise office buildings.
If  Landlord  does not elect to  terminate  this Lease  pursuant  to  Landlord's
termination  right as provided above,  and the Damage Repair Estimate  indicates
that repairs cannot be completed  within one hundred twenty (120) days after the
date Landlord learns of the necessity for repairs,  Tenant may elect,  not later
than thirty (30) days after Tenant's receipt of the Damage Repair  Estimate,  to
terminate  this Lease by written  notice to  Landlord  effective  as of the date
specified in Tenant's notice.

18.8 Waiver of Termination Right. This Lease sets forth the terms and conditions
upon which this Lease may  terminate in the event of any damage or  destruction.
Accordingly,  the parties hereby waive the  provisions of California  Civil Code
Section 1932,  Subsection  2, and Section 1933,  Subsection 4 (and any successor
statutes  thereof  permitting the parties to terminate this Lease as a result of
any damage or destruction).

19. Eminent Domain.

19.1  Substantial  Taking.  Subject to the provisions of Section 19.4 below,  in
case the whole of the  Premises,  or such part  thereof  as shall  substantially
interfere  with  Tenant's  use  and  occupancy  of the  Premises  as  reasonably
determined by Landlord, shall be taken for any public or quasi-public purpose by
any  lawful  power or  authority  by  exercise  of the  right of  appropriation,
condemnation  or eminent  domain,  or sold to prevent such taking,  either party
shall have the right to terminate this Lease effective as of the date possession
is required to be surrendered to said authority.

19.2 Partial Taking; Abatement of Rent. In the event of a taking of a portion of
the Premises which does not substantially interfere with the conduct of Tenant's
business,  then,  except as  otherwise  provided  in the  immediately  following
sentence,  neither  party  shall  have the  right to  terminate  this  Lease and
Landlord  shall  thereafter  proceed to make a functional  unit of the remaining
portion of the  Premises  (but only to the  extent  Landlord  receives  proceeds
therefor from the condemning  authority),  and rent shall be abated with respect
to the part of the Premises which Tenant shall be so deprived on account of such
taking.  Notwithstanding the immediately  preceding sentence to the contrary, if
any part of the  Building  or the  Project  shall be taken  (whether or not such
taking substantially interferes with Tenant's use of the Premises), Landlord may
terminate  this Lease upon thirty (30) days' prior  written  notice to Tenant as
long as Landlord also terminates leases of all other tenants leasing  comparably
sized space within the Building for comparable lease terms.

19.3  Condemnation  Award.  Subject to the provisions of Section 19.4 below,  in
connection  with any taking of the Premises or the Building,  Landlord  shall be
entitled to receive the entire amount of any award which may be made or given in
such taking or condemnation,  without  deduction or apportionment for any estate
or interest of Tenant,  it being expressly  understood and agreed by Tenant that
no  portion  of any  such  award  shall be  allowed  or paid to  Tenant  for any
so-called  bonus or excess  value of this Lease,  and such bonus or excess value
shall be the sole  property  of  Landlord.  Tenant  shall not  assert  any claim
against Landlord or the taking  authority for any  compensation  because of such
taking (including any claim for bonus or excess value of this Lease);  provided,
however,  if any portion of the  Premises is taken,  Tenant shall be granted the
right to recover  from the  condemning  authority  (but not from  Landlord)  any
compensation  as may be  separately  awarded  or  recoverable  by Tenant for the
taking of Tenant's  furniture,  fixtures,  equipment and other personal property
within the  Premises,  for  Tenant's  relocation  expenses,  and for any loss of
goodwill or other damage to Tenant's business by reason of such taking.

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19.4  Temporary  Taking.  In the event of a taking of the  Premises  or any part
thereof for temporary use, (a) this Lease shall be and remain unaffected thereby
and rent shall not abate, and (b) Tenant shall be entitled to receive for itself
such  portion or  portions  of any award  made for such use with  respect to the
period of the taking  which is within  the Term,  provided  that if such  taking
shall remain in force at the  expiration or earlier  termination  of this Lease,
Tenant shall perform its  obligations  under Section 9 with respect to surrender
of the  Premises  and shall pay to  Landlord  the  portion of any award which is
attributable to any period of time beyond the Term expiration  date. For purpose
of this  Section  19.4,  a temporary  taking  shall be defined as a taking for a
period of two hundred seventy (270) days or less.

19.5 Waiver of Termination Right. This Lease sets forth the terms and conditions
upon which this Lease may terminate in the event of a taking.  Accordingly,  the
parties waive the provisions of the California Code of Civil  Procedure  Section
1265.130  and any  successor  or  similar  statutes  permitting  the  parties to
terminate this Lease as a result of a taking.

20. Tenant's Insurance.

20.1 Types of Insurance.  On or before the earlier of the  Commencement  Date or
the date Landlord delivers  possession of the Premises to Tenant, and continuing
thereafter  until the  expiration  of the Term,  Tenant shall obtain and keep in
full force and effect, the following insurance:

(a)   Special  Form  (fka All  Risk)  insurance,  including  fire  and  extended
      coverage,  sprinkler leakage  (including  earthquake  sprinkler  leakage),
      vandalism,  malicious  mischief and  earthquake  coverage upon property of
      every  description and kind owned by Tenant and located in the Premises or
      the Building,  or for which Tenant is legally liable or installed by or on
      behalf of Tenant including, without limitation,  furniture,  equipment and
      any other  personal  property,  and any Tenant  Changes (but excluding the
      Tenant  Improvements and any Tenant Changes that Landlord elects to insure
      pursuant to Section  12.1(b)  above),  in an amount not less then the full
      replacement cost thereof. In the event that there shall be a dispute as to
      the amount which comprises full replacement cost, the decision of Landlord
      or the mortgagees of Landlord shall be presumptive.

(b)   Commercial general liability insurance  coverage,  on an occurrence basis,
      including personal injury, bodily injury (including wrongful death), broad
      form property damage,  operations  hazard,  owner's  protective  coverage,
      contractual  liability  (including  Tenant's  indemnification  obligations
      under this Lease,  including  Section 17  hereof),  liquor  liability  (if
      Tenant serves alcohol on the Premises),  products and completed operations
      liability, and owned/non-owned auto liability, with a general aggregate of
      not less than Two Million  Dollars  ($2,000,000)  and with  "umbrella"  or
      "excess  liability"   coverage  of  not  less  than  Two  Million  Dollars
      ($2,000,000).  The limits of such commercial  general liability  insurance
      shall be increased  every three (3) years during the Term of this Lease to
      an amount reasonably required by Landlord.

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

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

(e)   Any  other  form or  forms of  insurance  as  Tenant  or  Landlord  or the
      mortgagees of Landlord may reasonably  require from time to time, in form,
      amounts and for  insurance  risks  against  which a prudent  tenant  would
      protect  itself,  but  only to the  extent  such  risks  and  amounts  are
      available in the insurance market at commercially reasonable costs.

20.2  Requirements.  Each policy  required  to be  obtained by Tenant  hereunder
shall:  (a) be  issued  by  insurers  which  are  approved  by  Landlord  and/or
Landlord's  mortgagees  and are  authorized to do business in the state in which
the Building is located and rated not less than financial  class X, and not less
than policyholder rating A in the most recent version of Best's Key Rating Guide
(provided  that,  in any event,  the same  insurance  company  shall provide the
coverages  described  in Sections  20.1(a) and  20.1(d)  above);  (b) be in form
reasonably  satisfactory from time to time to Landlord; (c) name Tenant as named
insured  thereunder  and shall name Landlord and, at  Landlord's  request,  such
other  persons or entities  of which  Tenant has been  informed  in writing,  as
additional insureds  thereunder,  all as their respective  interests may appear;
(d) not have a deductible  amount exceeding Five Thousand  Dollars  ($5,000.00),
which  deductible  amount  shall be  deemed  self-insured  with  full  waiver of
subrogation; (e) specifically provide that the insurance afforded by such policy
for the  benefit of  additional  insureds  shall be primary,  and any  insurance
carried by the  additional  insureds shall be excess and  non-contributing;  (f)
contain an  endorsement  that the  insurer  waives its right to  subrogation  as
described  in Section 22 below;  (g) require the insurer to notify  Landlord and
the other additional insureds in writing not less than thirty (30) days prior to
any material change,  reduction in coverage,  cancellation or other  termination
thereof; (h) contain a cross liability or severability of interest  endorsement;
(i)  be  in  amounts   sufficient  at  all  times  to  satisfy  any  coinsurance
requirements  thereof and (j) provide that any loss otherwise payable thereunder
shall be payable notwithstanding any act or omission of Landlord or Tenant which
might,  absent such  provision,  result in a forfeiture of all or a part of such
insurance payment.  Tenant agrees to deliver to Landlord, as soon as practicable
after the placing of the required insurance, but in no event later than the date
Tenant is required to obtain such  insurance as set forth in Section 20.1 above,
certificates  from  the  insurance  company  evidencing  the  existence  of such
insurance and Tenant's compliance with the foregoing  provisions of this Section
20. Tenant shall cause replacement  certificates to be delivered to Landlord not
less  than  thirty  (30)  days  prior to the  expiration  of any such  policy or
policies.  If any such initial or  replacement  certificates  are not  furnished
within the time(s)  specified  herein,  Tenant shall be deemed to be in material
default  under this Lease without the benefit of any  additional  notice or cure
period  provided in Section 23.1 below,  and Landlord shall have the right,  but
not the  obligation,  to procure  such  policies  and  certificates  at Tenant's
expense.

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20.3  Effect on  Insurance.  Tenant  shall not do or permit to be done  anything
which will (a) violate or invalidate any insurance policy maintained by Landlord
or  Tenant  hereunder,  or  (b)  increase  the  costs  of any  insurance  policy
maintained by Landlord  pursuant to Section 21 or otherwise  with respect to the
Building or the Project.  If Tenant's occupancy or conduct of its business in or
on the Premises results in any increase in premiums for any insurance carried by
Landlord  with  respect to the  Building or the  Project,  Tenant shall pay such
increase as additional  rent within ten (10) days after being billed therefor by
Landlord.  If any insurance  coverage carried by Landlord pursuant to Section 21
or otherwise  with respect to the Building or the Project  shall be cancelled or
reduced (or cancellation or reduction  thereof shall be threatened) by reason of
the use or occupancy of the Premises by Tenant or by anyone  permitted by Tenant
to be upon the  Premises,  and if Tenant fails to remedy such  condition  within
five (5) days  after  notice  thereof,  Tenant  shall be deemed to be in default
under this Lease,  without the benefit of any  additional  notice or cure period
specified in Section 23.1 below,  and Landlord shall have all remedies  provided
in this Lease, at law or in equity,  including,  without  limitation,  the right
(but not the  obligation)  to enter upon the Premises and attempt to remedy such
condition at Tenant's cost.

21. Landlord's Insurance. During the Term, Landlord shall insure the Common Area
improvements, the Building, the Premises and the Tenant Improvements (excluding,
however,  Tenant's  furniture,  equipment and other personal property and Tenant
Changes,  unless Landlord otherwise elects to insure the Tenant Changes pursuant
to Section 12.1(b) above) against damage by fire and standard  extended coverage
perils and with  vandalism  and  malicious  mischief  endorsements,  rental loss
coverage, at Landlord's option,  earthquake damage coverage, and such additional
coverage as Landlord deems  appropriate.  Landlord  shall also carry  commercial
general liability insurance, in such reasonable amounts and with such reasonable
deductibles as would be carried by a prudent owner of a similar  building in the
state in which the Building is located. At Landlord's option, all such insurance
may be carried  under any blanket or umbrella  policies  which  Landlord  has in
force for other  buildings and  projects.  In addition,  at  Landlord's  option,
Landlord may elect to  self-insure  all or any part of such  required  insurance
coverage.  Landlord  may, but shall not be obligated to, carry any other form or
forms of insurance as Landlord or the  mortgagees or ground  lessors of Landlord
may  reasonably  determine  is  advisable.  The cost of  insurance  obtained  by
Landlord  pursuant  to this  Section  21  (including  self-insured  amounts  and
deductibles) shall be included in Operating Expenses.

22. Waivers of Subrogation.

22.1 Mutual Waiver of Parties.  Notwithstanding anything herein to the contrary,
Landlord and Tenant hereby waive their rights against each other with respect to
any  claims or  damages  or  losses  which  are  caused  by or  result  from (a)
occurrences  insured  against under any insurance  policy (other than commercial
general liability  insurance) carried by Landlord or Tenant (as the case may be)
pursuant to the  provisions  of this Lease and  enforceable  at the time of such
damage or loss,  or (b)  occurrences  which  would have been  covered  under any
insurance (other than commercial  general  liability  insurance)  required to be
obtained  and  maintained  by  Landlord  or  Tenant  (as the case may be)  under
Sections  20 and 21 of this  Lease  (as  applicable)  had  such  insurance  been
obtained and maintained as required  therein.  The foregoing waivers shall be in
addition to, and not a limitation of, any other waivers or releases contained in
this Lease, and shall include deductibles and self-insured retentions.

22.2 Waiver of Insurers.  Each party shall cause each  insurance  policy  (other
than  commercial  general  liability  insurance)  required  to be obtained by it
pursuant to Sections 20 and 21 to provide that the insurer  waives all rights of
recovery by way of subrogation  against either  Landlord or Tenant,  as the case
may be, in  connection  with any  claims,  losses  and  damages  covered by such
policy. If either party fails to maintain any such insurance required hereunder,
such insurance shall be deemed to be  self-insured  with a deemed full waiver of
subrogation as set forth in the immediately preceding sentence.

23. Tenant's Default and Landlord's Remedies.

23.1 Tenant's Default. The occurrence of any one or more of the following events
shall constitute a default under this Lease by Tenant:

(a)   the vacation or  abandonment of the Premises by Tenant.  "Abandonment"  is
      herein  defined to  include,  but is not limited to, any absence by Tenant
      from the Premises for five (5) business days or longer;

(b)   the  failure by Tenant to make any payment of rent or  additional  rent or
      any other  payment  required  to be made by Tenant  hereunder,  where such
      failure  continues  for three (3) days after written  notice  thereof from
      Landlord that such payment was not received;

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(c)   the  failure by Tenant to observe or perform any of the express or implied
      covenants  or  provisions  of this Lease to be  observed or  performed  by
      Tenant,  other than as specified in Sections  23.1(a) or (b) above,  where
      such failure  shall  continue for a period of ten (10) days after  written
      notice  thereof from Landlord to Tenant;  provided,  however,  that if the
      nature of Tenant's  default is such that it may be cured but more than ten
      (10) days are reasonably  required for its cure,  then Tenant shall not be
      deemed to be in default if Tenant shall commence such cure within said ten
      (10)  day  period  and  thereafter   diligently  prosecute  such  cure  to
      completion,  which  completion  shall occur not later than sixty (60) days
      from the date of such notice from Landlord;

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

(e)   any  material  representation  or warranty  made by Tenant or guarantor in
      this  Lease  or any  other  document  delivered  in  connection  with  the
      execution  and  delivery of this Lease or pursuant to this Lease proves to
      be incorrect in any material respect; or

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

Any notice sent by Landlord to Tenant  pursuant to this Section 23.1 shall be in
lieu of, and not in addition to, any notice  required under  California  Code of
Civil Procedure Section 1161.

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

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

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

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

(d)   any other amount  necessary to  compensate  Landlord for all the detriment
      proximately  caused by Tenant's  failure to perform its obligations  under
      this Lease or which, in the ordinary course of things,  would be likely to
      result  therefrom  including,  but  not  limited  to:  unamortized  Tenant
      Improvement costs; attorneys' fees; unamortized brokers' commissions;  the
      costs  of  refurbishment,   alterations,  renovation  and  repair  of  the
      Premises;  and removal  (including the repair of any damage caused by such
      removal)  and  storage  (or  disposal)  of  Tenant's  personal   property,
      equipment,  fixtures,  Tenant Changes,  Tenant  Improvements and any other
      items  which  Tenant is  required  under this Lease to remove but does not
      remove.

As used in Sections  23.2(a) and 23.2(b) above, the "worth at the time of award"
is computed by allowing  interest at the Interest Rate set forth in Section 1.14
of the  Summary.  As used in Section  23.2(c)  above,  the "worth at the time of
award" is  computed  by  discounting  such  amount at the  discount  rate of the
Federal  Reserve  Bank of San  Francisco  at the time of award plus one  percent
(1%).

23.3 Landlord's  Remedies;  Re-Entry Rights. In the event of any such default by
Tenant,  in  addition to any other  remedies  available  to Landlord  under this
Lease, at law or in equity,  Landlord shall also have the right, with or without
terminating  this Lease,  to re-enter  the  Premises  and remove all persons and
property from the Premises; such property may be removed, stored and/or disposed
of pursuant to Section 12.4 of this Lease or any other  procedures  permitted by
applicable  law. No re-entry or taking  possession  of the  Premises by Landlord
pursuant to this Section 23.3, and no acceptance of surrender of the Premises or
other action on Landlord's  part, shall be construed as an election to terminate
this  Lease  unless a  written  notice of such  intention  be given to Tenant or
unless the termination thereof be decreed by a court of competent  jurisdiction.

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23.4  Landlord's  Remedies;  Continuation  of  Lease.  In the  event of any such
default by Tenant, in addition to any other remedies available to Landlord under
this Lease, at law or in equity,  Landlord shall have the right to continue this
Lease in full force and effect,  whether or not Tenant shall have  abandoned the
Premises.  The foregoing remedy shall also be available to Landlord  pursuant to
California  Civil Code Section 1951.4 and any successor  statute  thereof in the
event  Tenant  has  abandoned  the  Premises.  In the event  Landlord  elects to
continue this Lease in full force and effect pursuant to this Section 23.4, then
Landlord  shall be entitled to enforce all of its rights and remedies under this
Lease,  including  the  right to  recover  rent as it  becomes  due.  Landlord's
election not to terminate  this Lease  pursuant to this Section 23.4 or pursuant
to any other  provision of this Lease,  at law or in equity,  shall not preclude
Landlord from  subsequently  electing to terminate this Lease or pursuing any of
its other remedies.

23.5 Landlord's Right to Perform.  Except as specifically  provided otherwise in
this Lease,  all  covenants  and  agreements by Tenant under this Lease shall be
performed by Tenant at Tenant's  sole cost and expense and without any abatement
or offset of rent.  If Tenant  shall  fail to pay any sum of money  (other  than
Basic  Rent)  or  perform  any  other  act on its  part to be paid or  performed
hereunder  and such  failure  shall  continue for three (3) days with respect to
monetary obligations (or ten (10) days with respect to non-monetary  obligations
(except in case of emergencies,  in which such case, such shorter period of time
as is reasonable  under the  circumstances))  after Tenant's  receipt of written
notice thereof from Landlord,  Landlord may, without waiving or releasing Tenant
from any of Tenant's obligations, make such payment or perform such other act on
behalf of Tenant.  All sums so paid by  Landlord  and all  necessary  incidental
costs  incurred by Landlord  in  performing  such other acts shall be payable by
Tenant to Landlord  within  five (5) days after  demand  therefor as  additional
rent.

23.6 Interest.  If any monthly  installment of Basic Rent or Operating Expenses,
or any other amount  payable by Tenant  hereunder is not received by Landlord by
the date when due,  it shall bear  interest  at the  Interest  Rate set forth in
Section 1.14 of the Summary from the date due until paid. All interest,  and any
late  charges  imposed  pursuant  to Section  23.7  below,  shall be  considered
additional rent due from Tenant to Landlord under the terms of this Lease.

23.7 Late Charges.  Tenant acknowledges that, in addition to interest costs, the
late  payments  by Tenant to  Landlord  of any rent or other sums due under this
Lease will cause  Landlord to incur costs not  contemplated  by this Lease,  the
exact amount of such costs being  extremely  difficult and  impractical  to fix.
Such other costs include,  without  limitation,  processing,  administrative and
accounting charges and late charges that may be imposed on Landlord by the terms
of any  mortgage,  deed of trust  or  related  loan  documents  encumbering  the
Premises,  the  Building or the Project.  Accordingly,  if any rent or any other
amount  payable by Tenant  hereunder is not received by Landlord by the due date
thereof,  Tenant shall pay to Landlord an additional sum of ten percent (10%) of
the overdue amount as a late charge,  but in no event more than the maximum late
charge allowed by law. The parties agree that such late charge represents a fair
and  reasonable  estimate of the costs that Landlord will incur by reason of any
late  payment as  hereinabove  referred  to by Tenant,  and the  payment of late
charges and  interest  are distinct and separate in that the payment of interest
is to compensate  Landlord for the use of Landlord's money by Tenant,  while the
payment of late charges is to  compensate  Landlord for  Landlord's  processing,
administrative  and other  costs  incurred  by  Landlord as a result of Tenant's
delinquent  payments.  Acceptance  of  a  late  charge  or  interest  shall  not
constitute a waiver of Tenant's  default  with respect to the overdue  amount or
prevent Landlord from exercising any of the other rights and remedies  available
to Landlord under this Lease or at law or in equity now or hereafter in effect.

23.8  Security  Interest.  Tenant  hereby grants to Landlord a lien and security
interest  on all  property  of  Tenant  now or  hereafter  placed in or upon the
Premises  including,  but not limited to, all  fixtures,  machinery,  equipment,
furnishings  and other  articles of personal  property,  and all proceeds of the
sale or other disposition of such property  (collectively,  the "Collateral") to
secure the payment of all rent to be paid by Tenant pursuant to this Lease. Such
lien and security  interest shall be in addition to any landlord's lien provided
by law. This Lease shall  constitute a security  agreement  under the Commercial
Code of the  State so that  Landlord  shall  have  and may  enforce  a  security
interest in the Collateral.  Tenant agrees to execute as debtor and deliver such
financing  statement or statements and any further documents as Landlord may now
or hereafter  reasonably  request to perfect or otherwise  protect such security
interest  pursuant  to such code.  Landlord  may also at any time file a copy of
this  Lease as a  financing  statement.  Landlord,  as secured  party,  shall be
entitled to all rights and remedies  afforded as secured  party under such code,
which rights and remedies  shall be in addition to  Landlord's  liens and rights
provided by law or by the other terms and provisions of this Lease.

23.9  Rights and  Remedies  Cumulative.  All  rights,  options  and  remedies of
Landlord  contained  in this  Section 23 and  elsewhere  in this Lease  shall be
construed  and held to be  cumulative,  and no one of them shall be exclusive of
the other,  and  Landlord  shall have the right to pursue any one or all of such
remedies  or any  other  remedy or relief  which  may be  provided  by law or in
equity, whether or not stated in this Lease. Nothing in this Section 23 shall be
deemed  to  limit or  otherwise  affect  Tenant's  indemnification  of  Landlord
pursuant to any provision of this Lease.

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

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

24. Landlord's  Default.  Landlord shall not be in default in the performance of
any  obligation  required to be  performed  by Landlord  under this Lease unless
Landlord has failed to perform such obligation within thirty (30) days after the
receipt of written notice from Tenant specifying in detail Landlord's failure to
perform;  provided however,  that if the nature of Landlord's obligation is such
that more than thirty (30) days are required for its performance,  then Landlord
shall not be deemed in default if it  commences  such  performance  within  such
thirty (30) day period and thereafter diligently pursues the same to completion.
Upon any such uncured default by Landlord, Tenant may exercise any of its rights
provided in law or at equity; provided,  however: (a) Tenant shall have no right
to offset or abate  rent in the event of any  default  by  Landlord  under  this
Lease, except to the extent offset rights are specifically provided to Tenant in
this Lease; (b) Tenant shall have no right to terminate this Lease; (c) Tenant's
rights  and  remedies  hereunder  shall be  limited to the extent (i) Tenant has
expressly  waived in this Lease any of such rights or remedies  and/or (ii) this
Lease otherwise  expressly  limits  Tenant's  rights or remedies,  including the
limitation on Landlord's  liability contained in Section 31 hereof and (d) in no
event  shall  Landlord be liable for  consequential  damages or loss of business
profits.

25.  Subordination.  Without the  necessity  of any  additional  document  being
executed by Tenant for the  purpose of  effecting  a  subordination,  and at the
election of Landlord or any mortgagee of a mortgage or a  beneficiary  of a deed
of trust now or hereafter  encumbering all or any portion of the Building or the
Project,  or any lessor of any ground or master lease now or hereafter affecting
all or any portion of the Building or the  Project,  this Lease shall be subject
and  subordinate  at all  times  to such  ground  or  master  leases  (and  such
extensions  and  modifications  thereof),  and to the lien of such mortgages and
deeds of trust (as well as to any advances made  thereunder and to all renewals,
replacements,   modifications  and  extensions  thereof).   Notwithstanding  the
foregoing,  Landlord  shall  have  the  right  to  subordinate  or  cause  to be
subordinated  any or all  ground  or  master  leases  or the  lien of any or all
mortgages  or deeds of trust to this  Lease.  In the  event  that any  ground or
master  lease  terminates  for any  reason or any  mortgage  or deed of trust is
foreclosed or a conveyance in lieu of foreclosure is made for any reason, at the
election of Landlord's successor in interest,  Tenant shall attorn to and become
the tenant of such successor.  Tenant hereby waives its rights under any current
or future law which gives or purports to give Tenant any right to  terminate  or
otherwise adversely affect this Lease and the obligations of Tenant hereunder in
the event of any such  foreclosure  proceeding  or sale.  Tenant  covenants  and
agrees to execute and deliver to Landlord  within ten (10) days after receipt of
written demand by Landlord and in the form reasonably required by Landlord,  any
additional documents evidencing the priority or subordination of this Lease with
respect to any such ground or master  lease or the lien of any such  mortgage or
deed of trust or Tenant's  agreement to attorn.  Should  Tenant fail to sign and
return any such  documents  within said ten (10) day period,  Tenant shall be in
default  hereunder  without the benefit of any additional notice or cure periods
specified in Section 23.1 above.

26. Estoppel Certificate.

26.1 Tenant's  Obligations.  Within ten (10) days following  Landlord's  written
request,  Tenant shall execute and deliver to Landlord an estoppel  certificate,
in a form  substantially  similar to the form of Exhibit  "F"  attached  hereto,
certifying:  (a) the  Commencement  Date of this  Lease;  (b) that this Lease is
unmodified and in full force and effect (or, if modified,  that this Lease is in
full  force and  effect as  modified,  and  stating  the date and nature of such
modifications); (c) the date to which the rent and other sums payable under this
Lease have been paid; (d) that there are not, to the best of Tenant's knowledge,
any defaults under this Lease by either Landlord or Tenant,  except as specified
in such certificate;  and (e) such other matters as are reasonably  requested by
Landlord.  Any such estoppel certificate delivered pursuant to this Section 26.1
may be relied  upon by any  mortgagee,  beneficiary,  purchaser  or  prospective
purchaser of any portion of the Project, as well as their assignees.

26.2  Tenant's  Failure to Deliver.  Tenant's  failure to deliver such  estoppel
certificate  within such time shall constitute a default  hereunder  without the
applicability of the notice and cure periods specified in Section 23.1 above and
shall be conclusive upon Tenant that: (a) this Lease is in full force and effect
without modification, except as may be represented by Landlord; (b) there are no
uncured  defaults in  Landlord's  or Tenant's  performance  (other than Tenant's
failure  to deliver  the  estoppel  certificate);  and (c) not more than one (1)
month's rental has been paid in advance. Tenant shall indemnify, protect, defend
(with  counsel  reasonably  approved by Landlord in writing)  and hold  Landlord
harmless  from and  against  any and all  claims,  judgments,  suits,  causes of
action, damages, losses, liabilities and expenses (including attorneys' fees and
court costs)  attributable  to any failure by Tenant to timely  deliver any such
estoppel certificate to Landlord pursuant to Section 26.1 above.

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27.  Project  Planning.  If Landlord  requires  the  Premises for use by another
tenant or for other reasons  connected with the Project  planning program or the
redevelopment  and/or  remodeling  of the  Building  and/or  Project  (including
demolishing  and rebuilding  the Building),  then Landlord shall have the right,
upon ninety (90) days' prior written notice to Tenant ("Relocation  Notice"), to
relocate the Premises to other space in the Building or the Project, or to other
space in any of the buildings or projects of similar  quality owned by Lessor or
Lessor's affiliates in the I-15  corridor/Rancho  Bernardo area of San Diego, of
substantially  similar size as the  Premises,  and with tenant  improvements  of
substantially  similar age, quality and layout as then existing in the Premises.
In the event of any such  relocation,  (i) Tenant shall receive ninety (90) days
of Basic Rent  abatement  commencing on the date of the Relocation  Notice,  and
(ii) Landlord  shall pay for the cost of providing  such  substantially  similar
tenant improvements (but not any furniture or personal  property),  and Landlord
shall  reimburse  Tenant,  within thirty (30) days after  Landlord's  receipt of
invoices and paid receipts, for the reasonable moving,  telephone  installation,
stationery  reprinting  and other  directly  related costs  actually paid for by
Tenant in connection with such relocation.  If Landlord so relocates Tenant, the
terms and  conditions  of this Lease  shall  remain in full force and effect and
apply to the new space,  except that (a) a revised Exhibit "B" shall become part
of this Lease and shall  reflect the location of the new space,  (b) the Summary
to this Lease shall be amended to include  and state all correct  data as to the
new  space,  and (c)  such  new  space  shall  thereafter  be  deemed  to be the
"Premises".  Notwithstanding the foregoing  provisions of this Section 27 to the
contrary,  if the new space contains more rentable square feet than the original
Premises,  Tenant shall not be obligated to pay any more Basic Rent or Operating
Expenses than otherwise applicable to the original Premises. Landlord and Tenant
agree to  cooperate  fully in order to  minimize  the  inconvenience  of  Tenant
resulting from such  relocation.  Notwithstanding  the  foregoing,  in the event
Landlord provides Tenant with a Relocation Notice, Tenant shall have the option,
upon written notice ("Termination Notice") to Landlord (which Termination Notice
must be given,  if at all,  within  ten (10) days  after  Tenant's  receipt of a
Relocation Notice from Landlord that specifies the building or projects to which
Landlord  proposes to relocate the Premises),  to terminate this Lease effective
as of the  termination  date  specified  in  the  Relocation  Notice;  provided,
however,  that if Tenant delivers a Termination Notice,  Landlord shall have the
right to rescind the  Relocation  Notice by written notice to Tenant within five
(5) days after  Landlord's  receipt of a Termination  Notice,  in which case the
Termination  Notice shall be null and void, the Premises shall not be relocated,
and this Lease shall remain in full force and effect.

28. Modification and Cure Rights of Landlord's Mortgagees and Lessors.

28.1 Modifications. If, in connection with Landlord's obtaining or entering into
any  financing  or ground  lease for any portion of the Building or the Project,
the lender or ground lessor shall request  modifications  to this Lease,  Tenant
shall, within ten (10) days after request therefor, execute an amendment to this
Lease including such modifications,  provided such modifications are reasonable,
do not increase the  obligations of Tenant  hereunder,  or adversely  affect the
leasehold estate created hereby or Tenant's rights hereunder.

28.2 Cure Rights.  In the event of any default on the part of  Landlord,  Tenant
will give notice by registered or certified mail to any beneficiary of a deed of
trust or  mortgagee  covering the  Premises or ground  lessor of Landlord  whose
address shall have been furnished to Tenant,  and shall offer such  beneficiary,
mortgagee  or  ground  lessor  a  reasonable  opportunity  to cure  the  default
(including  with respect to any such  beneficiary  or mortgagee,  time to obtain
possession of the Premises, subject to this Lease and Tenant's rights hereunder,
by power of sale or judicial  foreclosure,  if such should  prove  necessary  to
effect a cure).

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

30. Transfer of Landlord's Interest.  The term "Landlord" as used in this Lease,
so far as covenants or  obligations  on the part of the Landlord are  concerned,
shall be limited to mean and  include  only the owner or owners,  at the time in
question,  of the fee title to, or a lessee's interest in a ground lease of, the
Project.  In the  event of any  transfer  or  conveyance  of any  such  title or
interest  (other than a transfer for security  purposes  only),  the  transferor
shall be automatically  relieved of all covenants and obligations on the part of
Landlord  contained  in this Lease.  Landlord  and  Landlord's  transferees  and
assignees  shall have the absolute right to transfer all or any portion of their
respective title and interest in the Project, the Building,  the Premises and/or
this Lease  without  the  consent of Tenant,  and such  transfer  or  subsequent
transfer shall not be deemed a violation on Landlord's  part of any of the terms
and conditions of this Lease.

31. Limitation on Landlord's  Liability.  Notwithstanding  anything contained in
this  Lease to the  contrary,  the  obligations  of  Landlord  under  this Lease
(including  any  actual  or  alleged  breach  or  default  by  Landlord)  do not
constitute personal obligations of the individual partners,  directors, officers
or  shareholders of Landlord or Landlord's  partners,  and Tenant shall not seek
recourse against the individual partners, directors, officers or shareholders of
Landlord  or  Landlord's   partners,   or  any  of  their  personal  assets  for
satisfaction  of any  liability  with  respect to this Lease.  In  addition,  in
consideration of the benefits accruing  hereunder to Tenant and  notwithstanding
anything  contained in this Lease to the contrary,  Tenant hereby  covenants and
agrees for itself and all of its  successors  and assigns that the  liability of
Landlord for its  obligations  under this Lease  (including  any  liability as a
result  of any  actual  or  alleged  failure,  breach or  default  hereunder  by
Landlord),  shall be limited  solely to, and  Tenant's and its  successors'  and
assigns' sole and exclusive remedy shall be against,  Landlord's interest in the
Project, and no other assets of Landlord.

                                      (20)
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32. Miscellaneous.

32.1 Governing Law. This Lease shall be governed by, and construed  pursuant to,
the laws of the state in which the Premises are located.

32.2 Successors and Assigns.  Subject to the provisions of Section 30 above, and
except as otherwise provided in this Lease, all of the covenants, conditions and
provisions of this Lease shall be binding  upon,  and shall inure to the benefit
of, the parties hereto and their respective heirs, personal  representatives and
permitted  successors and assigns;  provided,  however, no rights shall inure to
the benefit of any  Transferee of Tenant unless the Transfer to such  Transferee
is made in compliance with the provisions of Section 14, and no options or other
rights which are expressly made personal to the original Tenant  hereunder or in
any rider attached  hereto shall be assignable to or exercisable by anyone other
than the original Tenant under this Lease.

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

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

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

32.6 Terms and Headings.  The words "Landlord" and "Tenant" as used herein shall
include  the plural as well as the  singular.  Words used in any gender  include
other genders.  The Section  headings of this Lease are not a part of this Lease
and shall have no effect upon the  construction  or  interpretation  of any part
hereof.  Any  deletion of language  from this Lease  prior to its  execution  by
Landlord and Tenant shall not be  construed to raise any  presumption,  canon of
construction or implication, including, without limitation, any implication that
the parties intended thereby to state the converse of the deleted language.  The
parties  hereto  acknowledge  and  agree  that  each  has  participated  in  the
negotiation and drafting of this Lease;  therefore, in the event of an ambiguity
in, or dispute regarding the  interpretation  of, this Lease, the interpretation
of this Lease shall not be resolved by any rule of interpretation  providing for
interpretation  against the party who caused the uncertainty to exist or against
the draftsman.

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

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

32.9 Separability.  The invalidity or  unenforceability of any provision of this
Lease (except for Tenant's  obligation to pay Basic Rent and Operating  Expenses
under Sections 3 and 4 hereof) shall in no way affect,  impair or invalidate any
other provision hereof, and such other provisions shall remain valid and in full
force and effect to the fullest extent permitted by law.

                                      (21)
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32.10  Recording.  Neither  Landlord  nor Tenant  shall  record this  Lease.  In
addition, neither party shall record a short form memorandum of this Lease.

32.11  Exhibits and Riders.  All Exhibits and Riders  attached to this Lease are
hereby incorporated in this Lease for all purposes as though set forth at length
herein.

32.12  Auctions.  Tenant  shall have no right to conduct  any  auction in, on or
about the Premises, the Building or the Project.

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

32.14  Financial  Statements.  Upon ten (10) days  prior  written  request  from
Landlord  (which Landlord may make at any time during the Term but no more often
than once in any  calendar  year),  Tenant  shall  deliver to Landlord a current
financial  statement of Tenant and any guarantor of this Lease.  Such statements
shall be prepared in accordance with generally acceptable  accounting principles
and  certified  as true in all  material  respects  by Tenant  (if  Tenant is an
individual) or by an authorized officer of Tenant (if Tenant is a corporation or
limited  liability  company)  or a general  partner  of Tenant  (if  Tenant is a
partnership).

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

32.16 Force  Majeure.  In the event that either party hereto shall be delayed or
hindered in or prevented from the  performance of any act required  hereunder by
reason of strikes,  lock-outs,  labor troubles,  inability to procure materials,
failure  of  power,  governmental  moratorium  or other  governmental  action or
inaction  (including  failure,  refusal or delay in issuing  permits,  approvals
and/or  authorizations),  injunction or court order, riots,  insurrection,  war,
fire,  earthquake,  flood or other  natural  disaster or other  reason of a like
nature  not the fault of the party  delaying  in  performing  work or doing acts
required  under the terms of this Lease (but  excluding  delays due to financial
inability) (herein  collectively,  "Force Majeure Delays"),  then performance of
such act shall be  excused  for the  period of the delay and the  period for the
performance  of any such act shall be extended  for a period  equivalent  to the
period of such delay.  The  provisions  of this Section 32.16 shall not apply to
nor operate to excuse Tenant from the payment of Basic Rent, Operating Expenses,
percentage  rent,  if any,  additional  rent or any other  payments  strictly in
accordance with the terms of this Lease.

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

32.18  Nondisclosure  of Lease Terms.  Tenant  acknowledges  and agrees that the
terms of this Lease are confidential and constitute  proprietary  information of
Landlord. Disclosure of the terms could adversely affect the ability of Landlord
to negotiate other leases and impair Landlord's relationship with other tenants.
Accordingly,  Tenant  agrees  that it, and its  partners,  officers,  directors,
employees,  agents  and  attorneys,  shall  not  intentionally  and  voluntarily
disclose  the terms  and  conditions  of this  Lease to any  newspaper  or other
publication or any other tenant or apparent  prospective  tenant of the Building
or other  portion of the  Project,  or real  estate  agent,  either  directly or
indirectly,  without the prior written consent of Landlord,  provided,  however,
that Tenant may disclose the terms to prospective  subtenants or assignees under
this Lease.

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

                                      (22)
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33. Lease Execution.

33.1 Tenant's  Authority.  If Tenant executes this Lease as a limited  liability
company, partnership or corporation, then Tenant and the persons and/or entities
executing this Lease on behalf of Tenant  represent and warrant that: (a) Tenant
is a duly organized and validly existing limited liability company,  partnership
or corporation, as the case may be, and is qualified to do business in the state
in which the Premises are located;  (b) such persons and/or  entities  executing
this Lease are duly  authorized  to execute and  deliver  this Lease on Tenant's
behalf in  accordance  with the  Tenant's  operating  agreement  (if Tenant is a
limited  liability  company),  Tenant's  partnership  agreement  (if Tenant is a
partnership),  or a duly adopted  resolution of Tenant's  board of directors and
Tenant's  by-laws  (if Tenant is a  corporation);  and (c) this Lease is binding
upon Tenant in accordance with its terms.  Concurrently with Tenant's  execution
and delivery of this Lease to Landlord  and/or at any time during the Lease Term
within ten (10) days of Landlord's  request,  Tenant shall provide to Landlord a
copy  of  any  documents   reasonably  requested  by  Landlord  evidencing  such
qualification, organization, existence and authorization.

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

33.3 Intentionally Omitted.

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

34. Waiver of Jury Trial. To the extent  permitted by applicable law, each Party
hereby  waives  any  right to a trial  by jury in any  action  seeking  specific
performance  of any  provision  of this Lease,  for damages for any breach under
this Lease, or otherwise for enforcement of any right or remedy hereunder.

                                      (23)
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IN WITNESS WHEREOF,  the parties have executed this Lease as of the day and year
first above written.

"TENANT"                           E.DIGITAL CORPORATION,
                                   a California corporation

                                   *By: /s/ WILLIAM BLAKELEY
                                         Name: William Blakeley
                                         Title: President

                                   By:  /s/ ROBERT PUTNAM
                                         Name: Robert Putnam
                                         Title: Sr. V.P.

"LANDLORD"                         LBA INDUSTRIAL FUND - HOLDING CO. II, INC.
                                   a Delaware corporation

                                   By: /s/ Steven R. Briggs
                                         Name: Steven R. Briggs
                                         Title: Authorized Signatory

                                   INNSBRUCK HOLDINGS, L.P.,
                                   a California limited partnership

                                   By:  Innsbruck L.P.,
                                        a California limited partnership

                                        By: LBAIF Sub I, LLC,
                                            a Delaware limited liability company

                                            By: LBA Industrial Properties, Inc.,
                                                a Delaware corporation

                                          By: /s/ Steven R. Briggs
                                          Name: Steven R. Briggs

                                          Title: Authorized Signatory

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

(A)   This Lease must be signed by two (2)  officers  of such  corporation:  one
      being the chairman of the board,  the president or a vice  president,  and
      the other being the secretary, an assistant secretary, the chief financial
      officer or an assistant treasurer. If one (1) individual is signing in two
      (2) of the foregoing capacities, that individual must so indicate.
(B)   If the  requirements  of (A) above are not  satisfied,  then Tenant  shall
      deliver to Landlord  evidence  reasonably  acceptable to Landlord that the
      signatory(ies) is (are) authorized to execute this Lease.

If Tenant is a corporation  incorporated in a state other than California,  then
Tenant shall deliver to Landlord evidence reasonably acceptable to Landlord that
the signatory(ies) is (are) authorized to execute this Lease.

                                      (24)

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