Document:

<PAGE>   1
                                                                   EXHIBIT 10.32

                       SEAVIEW CORPORATE CENTER, PHASE II
                                  OFFICE LEASE

                                    LANDLORD:

                               LNR SEAVIEW, INC.,
                            A CALIFORNIA CORPORATION

                                     TENANT:

                               WEBSIDESTORY, INC.,
                            A CALIFORNIA CORPORATION

<PAGE>   2

               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 Office 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 the Summary and the Lease, the provisions of the Lease
shall control.

1.1    LANDLORD'S ADDRESS:   Lennar Partners
                             18401 Von Karman Avenue, Suite 540
                             Irvine, California 92612
                             Attn:  Asset Manager
                             Telephone:   (949) 442-6100
                             Facsimile:   (949) 442-6175

                             with a copy to:

                             The Muller Company
                             23521 Paseo de Valencia, Suite 200
                             Laguna Hills, California 92653
                             Attn:  Mr. Stephen J. Muller
                             Telephone:   (949) 460-5380
                             Facsimile:   (949) 586-0470

1.2    TENANT'S ADDRESS:     Before Commencement Date:

                             WebSideStory, Inc.
                             6450 Lusk Blvd., E 205
                             San Diego, California 92121
                             Attn:   Chief Financial Officer
                             Telephone:   (619) 546-0040
                             Facsimile:   (619) 546-0480

                             After Commencement Date:

                             WebSideStory, Inc.
                             10182 Telesis Court, Suite 600
                             San Diego, California 92121
                             Attn:   Chief Financial Officer
                             Telephone:  (619) 546-0040
                             Facsimile:  (619) 546-0480

With a copy to:              The Irving Hughes Group, Inc.
                             501 W. Broadway, Suite 2020
                             San Diego, CA 92101
                             Attn:  Mr. David B. Marino
                             Telephone: (619) 238-4393
                             Facsimile: (619) 238-1025

1.3     SITE; PROJECT: The Site consists of the parcel(s) of real property
        located 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 the Site and all buildings, improvements and
        facilities, now or subsequently located on the Site from time to time,
        including, without limitation, the currently existing five (5) story
        office building located at 10180 Telesis Court containing 93,232
        rentable square feet, the two (2) story office building located at 10190
        Telesis Court containing 12,780 rentable square feet and the parking
        structure located at 10184 Telesis Court containing 1,354 rentable
        square feet (the "OTHER BUILDINGS") and the Building (defined below), as
        depicted on the site plan attached hereto as Exhibit "A". The aggregate
        rentable square feet of the Building and the Other Buildings is
        currently 230,164 rentable square feet.

1.4     BUILDING: A six (6) story office building located on the Site,
        containing 122,798 rentable square feet, the address of which is 10182
        Telesis Court, San Diego, California 92121.

1.5     PREMISES: Initially, those certain premises known as Suite(s) 500 and
        600 as generally shown on the floor plan attached hereto as Exhibit "B",
        located on the fifth (5th) and sixth (6th) floors of the

                                      -i-

<PAGE>   3
        Building, and containing 21,260 rentable square feet (20,015 usable
        square feet) on the fifth (5th) floor and 18,599 rentable square feet
        (17,420 usable square feet) on the sixth (6th) floor, for a total of
        39,859 rentable square feet (37,435 usable square feet), together with
        the patio area located on the sixth (6th) floor of the Building (the
        "PATIO"). Commencing upon the Fourth Floor Delivery Date (as defined in
        Section 1.4 of the Lease), the Premises shall also include Suite 400 as
        generally shown on the floor plan attached hereto as Exhibit "B" located
        on the fourth (4th) floor of the Building, and containing 21,352
        rentable square feet (20,105 usable square feet) resulting in a total of
        61,211 rentable square feet (57,540 usable square feet). Although the
        Patio is a portion of the Premises, the area of the Patio shall not be
        considered for purposes of determining the rentable or usable square
        footage of the Premises.

1.6     TERM: Eighty-Four (84) months, subject to extension pursuant to Section
        36.

1.7     ESTIMATED COMMENCEMENT DATE: January 10, 2000; COMMENCEMENT DATE: The
        earlier to occur of (i) January 10, 2000 or (ii) the date Tenant
        commences business operations in the Premises. The January 10, 2000 date
        referenced in clause (i) above (the "TARGET DATE") is subject to
        extension pursuant to Section 5.2 of Exhibit "C" attached hereto.

1.8     MONTHLY BASIC RENT: Upon the commencement of the Term of this Lease, and
        on the first day of each month thereafter during the Term of this Lease,
        Tenant shall pay to Landlord, in advance and without offset, deduction
        or demand as Monthly Basic Rent for the Premises the following monthly
        payments:

(a)     Monthly Basic Rent for the initial Premises (i.e., the 5th and 6th
        Floors).

<TABLE>
<CAPTION>

                        Months of Term         Monthly Basic Rent
                        --------------         ------------------
                        <S>                    <C>
                            1-4*                 $48,750.00**
                            5-8                  $58,500.00***
                            9-12                 $77,725.05
                           13-24                 $80,445.43
                           25-36                 $83,261.02
                           37-48                 $86,175.16
                           49-60                 $89,191.29
                           61-72                 $92,312.99
                           73-84                 $95,543.94
</TABLE>

  *     Including any partial month at the beginning of the Term if the
        Commencement Date is not the first (1st) day of the month.

 **     Calculated on the basis of 25,000 rentable square feet only.

***     Calculated on the basis of 30,000 rentable square feet only.

(b)     Monthly Basic Rent for Suite 400:

<TABLE>
<CAPTION>

                       Months of Term         Monthly Basic Rent
                       --------------         ------------------
                <S>                           <C>
                Fourth Floor Commencement         $41,636.40
                         Date - 12
                          13-24                   $43,093.67
                          25-36                   $44,601.95
                          37-48                   $46,163.02
                          49-60                   $47,778.73
                          61-72                   $49,450.99
                          73-84                   $51,181.77
</TABLE>

1.9     TENANT'S PERCENTAGE: 26.6%. Tenant's Percentage is subject to adjustment
        in accordance with Section 1.3 and 4.4(g) of the Lease.

1.10    BASE YEAR: Calendar year 2000

1.11    SECURITY DEPOSIT: $119,361.45, plus a letter of credit in the original
        amount of $360,000.00. See Section 5 of the Lease.

1.12    PERMITTED USE: General office uses and, to the extent legally
        permissible, research and development, and any other legally permissible
        uses, consistent with a first-class office building; provided, however,
        in no event may Tenant use the Premises for retail or restaurant
        purposes.

1.13    BROKERS: Colliers International representing Landlord.
                 The Irving Hughes Group, Inc. representing Tenant.

                                      -ii-
<PAGE>   4

1.14    INTEREST RATE: The lesser of: (a) the 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 bank operating in
        California, as its "prime rate" or "reference rate", plus two percent
        (2%); or (b) the maximum rate permitted by law.

1.15    TENANT IMPROVEMENTS: The tenant improvements installed or to be
        installed in the Premises as described in the Work Letter Agreement
        attached hereto as Exhibit "C".

1.16    PARKING: A total of 4.3 unreserved parking spaces per 1000 usable square
        feet of floor area of the Premises at no charge during the Term
        (including any Option Term), subject, however, to the payment of Direct
        Expenses attributable to the parking areas and to the provisions set
        forth in Section 6.2. Tenant shall be entitled to designate up to five
        (5) parking spaces for Tenant's exclusive use in locations designated by
        Landlord, in reasonable proximity to the Building, reasonably acceptable
        to Tenant. If Landlord grants to any other tenant of the Building the
        right to designate exclusive parking spaces at a ratio of exclusive
        spaces to non-exclusive spaces that is higher than the ratio of Tenant's
        exclusive spaces to non-exclusive spaces, then Landlord shall increase
        Tenant's exclusive spaces to equal such higher ratio.

1.17    BUSINESS HOURS FOR THE BUILDING. 7:00 a.m. to 7:00 p.m., Mondays through
        Fridays (except Building Holidays) and 9:00 a.m. to 1:00 p.m. on
        Saturdays (except Building Holidays). "BUILDING HOLIDAYS" shall mean New
        Year's Day, Labor Day, Presidents' Day, Thanksgiving Day, Memorial Day,
        Independence Day and Christmas Day and such other national holidays as
        are adopted by Landlord as holidays for the Building. Notwithstanding
        the Business Hours, Tenant shall be entitled to have access to the
        Premises on a seven (7) day per week, twenty-four (24) hour per day
        basis, subject, however, to the terms of the Lease.

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<PAGE>   5
                           STANDARD FORM OFFICE LEASE

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

SECTION                                    TITLE                                        PAGE
-------                                    -----                                        ----
<S>       <C>                                                                           <C>
1        Premises ....................................................................... 1
2        Term ........................................................................... 1
3        Rent ........................................................................... 2
4        Common Areas; Direct Expenses .................................................. 2
5        Security Deposit ............................................................... 7
6        Use ............................................................................ 8
7        Payments and Notices ...........................................................11
8        Brokers ........................................................................11
9        Surrender; Holding Over ........................................................11
10       Taxes on Tenants Property ......................................................12
11       Condition of Premises; Repairs .................................................12
12       Alterations ....................................................................13
13       Liens ..........................................................................15
14       Assignment and Subletting ......................................................15
15       Entry by Landlord ..............................................................17
16       Utilities and Services .........................................................18
17       Indemnification and Exculpation ................................................19
18       Damage or Destruction ..........................................................20
19       Eminent Domain .................................................................21
20       Tenant's Insurance .............................................................21
21       Landlord's insurance ...........................................................22
22       Waiver of Claims; Waiver of Subrogation.........................................23
23       Tenant's Default and Landlord's Remedies........................................23
24       Landlord's Default..............................................................25
25       Subordination...................................................................25
26       Estoppel Certificate............................................................26
27       Intentionally Omitted...........................................................26
28       Modification and Cure Rights of Landlord's Mortgagees and Lessors...............26
29       Quiet Enjoyment.................................................................26
30       Transfer of Landlord's Interest.................................................26
31       Limitation on Landlord's Liability..............................................26
32       Miscellaneous...................................................................27
33       Lease Execution.................................................................28
34       Right of First Refusal..........................................................29
35       Temporary Space.................................................................30
36       Option Term.....................................................................30
</TABLE>

 EXHIBITS
 --------

 EXHIBIT "A"   Site Plan
 EXHIBIT "B"   Floor Plan
 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

                                      -iv-

<PAGE>   6
                          INDEX OF MAJOR DEFINED TERMS

<TABLE>
<CAPTION>
                                                          LOCATION OF DEFINITION
DEFINED TERMS                                             IN OFFICE LEASE
-------------                                             ----------------------
<S>                                                       <C>
Abandonment .........................................................         23
Abatement Event .....................................................         18
ADA .................................................................          9
Applicable Reassessment .............................................          7
Approved Working Drawings ...........................................          4
Architect ...........................................................  Exhibit C
Base Year ...........................................................          3
Base, Shell, and Core ...............................................  Exhibit C
BOMA Standard .......................................................          1
Brokers .............................................................         ii
Building ............................................................          i
Building Common Areas ...............................................          2
Building Holidays ...................................................        iii
Capital Items .......................................................          4
Cash Security Deposit ...............................................          7
Code ................................................................  Exhibit C
Commencement Date ...................................................         ii
Common Areas ........................................................          2
Comparable Buildings ................................................         31
Construction Drawings ...............................................  Exhibit C
Cost Pools ..........................................................          4
days ................................................................         27
Delay Notice ........................................................  Exhibit C
Direct Expenses .....................................................          3
Draw Request ........................................................  Exhibit C
Election Date .......................................................         29
Eligibility Period ..................................................         19
Engineer ............................................................          3
Essential Services ..................................................         19
Estimate ............................................................          6
Estimate Statement ..................................................          6
Estimated Commencement Date .........................................         ii
Estimated Excess ....................................................          6
Estimated Utilities Costs ...........................................          6
Evidence of Completion ..............................................  Exhibit C
Excess ..............................................................          6
Expense Year ........................................................          3
Extension Option ....................................................         30
Fair Market Rental Rate .............................................         30
Final Costs .........................................................  Exhibit C
Final Space Plan ....................................................  Exhibit C
Final Working Drawings ..............................................  Exhibit C
First Refusal Notice ................................................         29
First Refusal Space .................................................         29
Force Majeure Delays ................................................         28
Fourth Floor Commencement Date ......................................          1
Fourth Floor Delivery Date ..........................................          1
Hazardous Materials .................................................     10, 11
HVAC ................................................................         13
Indemnified Claims ..................................................         19
Landlord ............................................................          1
Landlord Caused Delay ...............................................  Exhibit C
Landlord Indemnified Parties ........................................         10
Landlord's Rate .....................................................  Exhibit C
Lease ...............................................................          1
Letter of Credit ....................................................          8
Monthly Basic Rent ..................................................         ii
MPE Subcontractors ..................................................          3
number of days ......................................................  Exhibit C
Operating Expenses ..................................................          3
Option Rent Notice ..................................................         30
Option Term .........................................................         30
Original Tenant .....................................................         10
Other Buildings .....................................................          i
Outside Agreement Date ..............................................         30
Patio ...............................................................         ii
PCBs ................................................................         11
</TABLE>

                                      -v-

<PAGE>   7
<TABLE>
<S>                                                                                   <C>
Permit Delay..........................................................................Exhibit C
Permits...............................................................................Exhibit C
Permitted Transfer...........................................................................16
Permitted Use................................................................................ii
Pre-Approved Change..........................................................................13
Premises......................................................................................i
Project.......................................................................................i
Project Common Areas..........................................................................2
Proposition 13................................................................................5
Proposition 13 Protection Amount..............................................................7
Proposition 13 Purchase Price.................................................................7
Reassessment..................................................................................6
rent..........................................................................................2
rentable area.................................................................................1
rentable square footage.......................................................................1
Retention.............................................................................Exhibit C
Security Deposit.............................................................................ii
Site..........................................................................................i
Special Sublease.............................................................................16
Specifications........................................................................Exhibit C
Standard Improvement Package..........................................................Exhibit C
Statement.....................................................................................6
Substantial Completion................................................................Exhibit C
Summary.......................................................................................1
Superior Leases..............................................................................29
Superior Rights..............................................................................29
Target Date..................................................................................ii
Tax Expenses..................................................................................5
Tax Increase..................................................................................6
Temporary Space..............................................................................30
Temporary Space Term.........................................................................30
Tenant........................................................................................1
Tenant Changes...............................................................................13
Tenant Improvement Allowance..........................................................Exhibit C
Tenant Improvement Allowance Items....................................................Exhibit C
Tenant Improvements...................................................................Exhibit C
Tenant Parties...............................................................................19
Tenant's Agents.......................................................................Exhibit C
Tenant's Election Notice.....................................................................29
Tenant's Parties.............................................................................10
Tenant's Percentage..........................................................................ii
Tenant's Proposed Terms......................................................................29
Tenant's Signage.............................................................................10
Term.........................................................................................ii
Terms........................................................................................29
Transfer.....................................................................................15
Transfer Notice..............................................................................16
Transferee...................................................................................16
Unavoidable Delay.....................................................................Exhibit C
usable area...................................................................................1
usable square footage.........................................................................1
Utilities Costs...............................................................................5
Work Letter Agreement.................................................................Exhibit C
worth at the time of award...................................................................24
</TABLE>

                                      -vi-

<PAGE>   8

                                  OFFICE LEASE

This LEASE, which includes the preceding Summary of Basic Lease Information and
Definitions ("Summary") attached hereto and incorporated herein by this
reference ("Lease"), is made as of the 23 day of August, 1999, by and between
LNR SEAVIEW, INC., a California corporation ("Landlord"), and WEBSIDESTORY, INC.
a California corporation ("Tenant"),

1.      PREMISES.

1.1     PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, the Premises described in Section 1.5 of the Summary above,
improved or to be improved with the Tenant Improvements. Such lease is upon, and
subject to, the terms, covenants and conditions herein set forth and each party
covenants, as a material part of the consideration for this Lease, to keep and
perform their respective obligations under this Lease.

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, and subject to
the terms of this Lease, Landlord reserves for itself 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     MEASUREMENT OF PREMISES, BUILDING AND/OR THE PROJECT. Landlord reserves
the right to remeasure the Premises, the Building and/or the Project and adjust
all provisions of this Lease which are based upon the area of the Premises, the
Building and/or the Project such as Tenant's Percentage, Monthly Basic Rent, and
the Tenant Improvement Allowance. As used in this Lease, the following terms
have the meanings indicated:

(a)     The term "USABLE AREA" or "USABLE SQUARE FOOTAGE" means the usable area
        as determined in accordance with the Standard Method for Measuring Floor
        Area in Office Buildings, ANSI/BOMA Z65.1 - 1996 (the "BOMA STANDARD");
        and

(b)     The term "RENTABLE AREA" or "RENTABLE SQUARE FOOTAGE" means the rentable
        area measured in accordance with the BOMA Standard, plus a prorata share
        of the usable area of the Project's recreational facilities.

1.4     SUITE 400. Landlord will deliver possession of Suite 400 to Tenant
within one (1) business day following Tenant's written request therefor (the
"FOURTH FLOOR DELIVERY DATE"). Tenant will construct the Tenant Improvements
within Suite 400 in accordance with the provisions of Exhibit "C", except that
(i) all references in Exhibit "C" to the Premises shall refer to Suite 400, (ii)
the Tenant Improvement Allowance will be in the amount up to, but not exceeding,
Thirty-Two Dollars ($32.00) per usable square foot of Suite 400 (for purposes of
calculating the Tenant Improvement Allowance, the usable square footage of Suite
400 shall be 19,705 (which excludes the restrooms, electrical rooms, tele/com
equipment rooms [but not Tenant's network operating center] and the curtain wall
in Suite 400), (iii) the time period for Landlord's review of the Final Space
Plan for Suite 400 shall be two (2) business days following Landlord's receipt
thereof and (iv) the Commencement Date for Suite 400 (the "FOURTH FLOOR
COMMENCEMENT DATE") shall be the earlier to occur of: (a) the date that is nine
(9) months following the Commencement Date (which nine (9) month period may only
be extended by reason of a Landlord Caused Delay and not by reason of a Permit
Delay or an Unavoidable Delay); or (b) Substantial Completion of the Tenant
Improvements for Suite 400. The Fourth Floor Commencement Date will not be
extended due to any delay in Tenant's request for delivery of Suite 400.
Following the determination of the Fourth Floor Commencement Date, and at the
request of either party, the parties shall enter into an amendment to this Lease
acknowledging the Fourth Floor Commencement Date and establishing a schedule for
Monthly Basic Rent that combines the Monthly Basic Rent for the initial Premises
and Suite 400.

2.      TERM.

2.1     TERM; NOTICE OF LEASE DATES. The Term of this Lease shall be for the
period designated in Section 1.6 of the Summary commencing on the Commencement
Date (as determined pursuant to Exhibit "C"), and ending on the expiration of
such period, unless the Term is sooner terminated 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     ESTIMATED COMMENCEMENT DATE. It is estimated by the parties that the
Term of this Lease will commence on the Estimated Commencement Date set forth in
Section 1.7 of the Summary. The Estimated Commencement Date is merely an
estimate of the Commencement Date and, consequently,

<PAGE>   9

Tenant agrees that Landlord shall have no liability to Tenant for any loss or
damage, nor shall Tenant be entitled to terminate or cancel this Lease if the
Term of this Lease does not commence by the Estimated Commencement Date for any
reason whatsoever, including any delays in substantial completion of the Tenant
Improvements.

2.3     EARLY OCCUPANCY. Tenant will occupy the Premises prior to the
Commencement Date for purposes of constructing the Tenant Improvements. 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 Monthly Basic Rent or any
additional rent during the period of such early occupancy. Tenant agrees to
cooperate with Landlord during the period of any such early occupancy so as not
to interfere with Landlord in the completion of any improvements to the Premises
to be constructed pursuant to Exhibit "C" by Landlord.

3.      RENT.

3.1     BASIC RENT. Tenant agrees to pay Landlord, as basic rent for the
Premises, the Monthly Basic Rent in the amounts designated in Section 1.8 of the
Summary. The Monthly Basic Rent shall be paid by Tenant in monthly installments
in the amounts designated in Section 1.8 of the Summary in advance on the first
day of each and every calendar month during the Term, without demand, notice,
deduction or offset (except as otherwise provided in this Lease), except that
the first full month's Monthly Basic Rent shall be paid upon the execution of
this Lease. Monthly 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.

3.2     ADDITIONAL RENT. All amounts and charges payable by Tenant under this
Lease in addition to the Monthly Basic Rent described in Section 3.1 above
(including, without limitation, payments for insurance, and repairs, and
Tenant's Percentage of Direct Expenses, and Utilities Costs as provided in
Section 4.5 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 Monthly Basic Rent is
referenced. The Monthly 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 whatever (except as otherwise provided in this Lease), in
lawful money of the United States of America.

4.      COMMON AREAS; DIRECT EXPENSES.

4.1     DEFINITIONS; TENANT'S RIGHTS. During the Term of this Lease, Tenant
shall have the non-exclusive right to use, in common with other tenants in the
Project, and subject to the Rules and Regulations referred to in Section 6.1
below, those portions of the Project (the "PROJECT COMMON AREAS") not leased or
designated for lease to tenants that are provided for use in common by Landlord,
Tenant and any other tenants of the Project (or by the sublessees, agents,
employees, customers invitees, guests or licensees of any such party), whether
or not those areas are open to the general public. The Project Common Areas
shall include, without limitation, any fixtures, systems, decor, facilities and
landscaping contained, maintained or used in connection with those areas, and
shall be deemed to include any city sidewalks adjacent to the Project, any
pedestrian walkway system, park or other facilities located on the Site and open
to the general public, the parking structure and parking areas (subject to
Section 6.2 below), the loading and unloading areas, trash areas, roadways,
parkways, and driveways, as well as the existing pool, workout facilities and
tennis facility for so long as Landlord, in its sole discretion, provides for
the same. The common areas of the Building shall be referred to herein as the
"BUILDING COMMON AREAS" and shall include, without limitation, the following
areas: 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.

The Building Common Areas and the Project Common Areas shall be referred to
herein collectively as the "COMMON AREAS."

4.2     LANDLORD'S RESERVED RIGHTS. Landlord reserves the right from time to
time to use any of the Common Areas and to do any of the following, as long as
such acts do not unreasonably interfere with Tenant's use of or access to the
Premises or Tenant's use and enjoyment of the Common Areas:

(a)     expand the Building and construct or alter other buildings or
        improvements on the Site;

(b)     make any changes, additions, improvements, repairs or replacements in or
        to the Project, the Site, the Common Areas and/or the Building
        (including the Premises if required to do so by any law or regulation)
        and the fixtures and equipment thereof, including, without limitation:
        (i) maintenance, replacement and relocation of pipes, ducts, conduits,
        wires and meters; and (ii) changes in the location, size, shape and
        number of driveways, entrances, stairways, elevators, loading and
        unloading areas, ingress, egress, direction of traffic, landscaped areas
        and walkways and, subject to Section 6.2, parking spaces and parking
        areas;

                                      -2-
<PAGE>   10

(c)     close temporarily any of the Common Areas while engaged in making
        repairs, improvements or alterations to the Project, Site and/or
        Building; and

(d)     perform such other acts and make such other changes with respect to the
        Project, Site, Common Areas and Building, as Landlord may, in the
        exercise of good faith business judgment, deem to be appropriate.

4.3     ADDITIONAL RENT. In addition to paying the Monthly Basic Rent, Tenant
shall pay as additional rent Tenant's Percentage of the annual Direct Expenses
that are in excess of the amount of Direct Expenses applicable to the Base Year
and Tenant's Percentage of the annual Utilities Costs.

4.4     DEFINITIONS. The following terms shall have the meanings hereinafter set
forth:

(a)     "BASE YEAR" shall mean the year set forth in Section 1.10 of the
        Summary.

(b)     "DIRECT EXPENSES" shall mean Operating Expenses and Tax Expenses.

(c)     "EXPENSE YEAR" shall mean each calendar year in which any portion of the
        Term falls, through and including the calendar year in which the Term
        expires; provided, that Landlord, upon notice to Tenant, may change the
        Expense Year from time to time to any twelve (12) consecutive month
        period, and, in the event of any such change, Tenant's Percentage of the
        Direct Expenses and Tenant's Percentage of the Utilities Costs shall be
        equitably adjusted for any Expense Year involved in any such change such
        that Tenant's Percentage is not affected to Tenant's financial
        detriment.

(d)     "OPERATING EXPENSES" shall mean all expenses, costs and amounts of every
        kind and nature which Landlord shall pay or incur during any Expense
        Year because of or in connection with the ownership, management,
        maintenance, repair, replacement, restoration or operation of the
        Project, including, without limitation, any amounts paid or incurred
        for: (i) the cost of janitorial service, alarm and security service,
        window cleaning, and trash removal, the cost of operating, maintaining,
        repairing, replacing, renovating and managing the utility systems,
        mechanical systems, sanitary and storm drainage systems, and escalator
        and elevator systems, and the cost of supplies, tools, and equipment and
        maintenance and service contracts in connection therewith; (ii) the cost
        of licenses, certificates, permits and inspections and the cost of
        contesting the validity or applicability of any governmental enactments
        which may affect Operating Expenses, and the costs incurred in
        connection with the implementation and operation of a transportation
        system management program or similar program; (iii) the cost of
        insurance carried by Landlord in connection with the Project, in such
        amounts as Landlord may reasonably determine, or as may be required by
        any mortgagees, or the lessor of any underlying or ground lease
        affecting the Project; (iv) the cost of landscaping, relamping,
        supplies, tools, equipment (including equipment rental agreements) and
        materials, and all fees, charges and other costs, including management
        fees (or amounts in lieu thereof), consulting fees, legal fees and
        accounting fees, incurred in connection with the management, operation,
        administration, maintenance and repair of the Project; (v) the cost of
        parking area repair, restoration and maintenance, including, but not
        limited to, resurfacing, repainting, restriping, and cleaning; (vi)
        wages, salaries and other compensation and benefits of all persons
        directly engaged in the operation, management, maintenance or security
        of the Project, and employer's Social Security taxes, unemployment taxes
        or insurance, and any other taxes which may be levied on such wages,
        salaries, compensation and benefits; (vii) payments under any easement,
        license, operating agreement, declaration, restrictive covenant, or
        instrument pertaining to the sharing of costs by the Project; (viii)
        amortization (including interest on the unamortized cost at the Interest
        Rate) of the cost of acquiring or the rental expense of personal
        property used in the maintenance, operation and repair of the Project;
        (ix) the cost (including rent) of Landlord's property management office
        for the Project and all utilities, supplies and materials used in
        connection therewith; and (x) the cost of any capital alterations,
        capital additions, or capital improvements made to the Project or any
        portion thereof (A) which relate to the operation, repair, maintenance
        and replacement of all systems, equipment or facilities which serve the
        Project in the whole or in part (including replacement of wall and floor
        coverings, ceiling tiles and fixtures in lobbies, corridors, restrooms
        and other common or public areas or facilities, maintenance and
        replacement of curbs, walkways and parking areas, and repairs to roofs
        and reroofing of improvements), (B) which are intended as a labor-saving
        device or to effect other economies in the operation or maintenance of
        the Project, or any portion thereof, or (C) that are required under any
        governmental law or regulation that is then being enforced by a federal,
        state or local governmental agency; provided, however, that each such
        permitted capital expenditure shall be amortized (including interest on
        the unamortized cost at the Interest Rate in effect at the time such
        expenditure is placed in service) over its useful life as Landlord shall
        reasonably determine in accordance with generally accepted accounting
        principles. If Landlord is not furnishing any particular work or service
        (the cost of which, if performed or provided by Landlord, would be
        included in Operating Expenses) to a tenant who has undertaken to
        perform such work or service in lieu of the performance thereof by
        Landlord, Operating Expenses shall be deemed to be increased by an
        amount equal to the additional Operating Expenses which would reasonably
        have been incurred during such period by Landlord if it had at its own
        expense furnished such work or service to such tenant. If the Building
        (and any additional buildings constructed in the Project) are not one
        hundred percent (100%) occupied during all or a portion of any Expense
        Year (including the Base Year), Landlord shall make an appropriate
        adjustment to the variable components of Operating

                                      -3-
<PAGE>   11
        Expenses for such Expense Year (including the Base Year) as reasonably
        determined by Landlord employing sound accounting and management
        principles, to determine the amount of Operating Expenses that would
        have been paid had such building(s) been one hundred percent (100%)
        occupied, and the amount so determined shall be deemed to have been the
        amount of Operating Expenses for such Expense Year. Notwithstanding
        anything to the contrary herein, when calculating Direct Expenses for
        the Base Year, Operating Expenses shall exclude market-wide labor-rate
        increases due to extraordinary circumstances, including, but not limited
        to, boycotts and strikes, and costs relating to capital improvements or
        expenditures.

        Landlord shall have the right, from time to time, to equitably allocate
        and prorate some or all of the Direct Expenses and/or Utilities Costs
        among different tenants and/or different buildings of the Project and/or
        on a building-by-building basis (the "COST POOLS"). Such Cost Pools may
        include, without limitation, the office space tenants and retail space
        tenants of the buildings in the Project and may be modified to take into
        account the addition of any additional office buildings within the
        Project. No costs for development or construction of future buildings,
        parking structures and sitework shall be included as an Operating
        Expense.

        Notwithstanding the foregoing, for purposes of this Lease, Operating
        Expenses shall not, however, include: (A) except as otherwise set forth
        above in this Section 4.4(d), interest on debt and amortization on
        mortgages; (B) ground lease payments; (C) costs of leasing commissions,
        attorneys' fees and other costs and expenses incurred in connection with
        negotiations or disputes with present or prospective tenants or other
        occupants of the Project; (D) Utilities Costs for which Tenant pays
        Tenant's Percentage to Landlord as set forth in Section 4.5 below; (E)
        any costs expressly excluded from Operating Expenses elsewhere in this
        Lease; (F) costs of any items to the extent Landlord receives
        reimbursement from insurance proceeds (such proceeds to be excluded from
        Operating Expenses in the year in which received, except that any
        deductible amount under any insurance policy shall be included within
        Operating Expenses) or from a third party; (G) costs, including permit,
        license and inspection costs, incurred in renovating or otherwise
        improving, decorating, or redecorating rentable space (including vacant
        rentable space) for tenants or other occupants in the Project; (H) tax
        penalties incurred as a result of Landlord's negligence, inability or
        unwillingness to make payments or file returns when due; (I) costs
        arising from Landlord's charitable or political contributions; (J) costs
        incurred in connection with upgrading the Building to comply with life,
        fire and safety codes, ordinances, statutes or other laws in effect
        prior to the Commencement Date, including, without limitation, the ADA,
        including penalties or damages incurred due to such noncompliance (for
        this purpose, a change in the interpretation of or change in the
        procedures for enforcing an existing law will be the equivalent of a new
        law; provided, however, that costs incurred by Landlord in connection
        with the loss of a variance or a disappearance of a
        grandfathered/grandmothered right shall not be included as an Operating
        Expense); (K) depreciation, amortization and interest payments, except
        as provided herein, and except with respect to materials, tools,
        supplies and vendor-type equipment purchased by Landlord to enable
        Landlord to supply services Landlord might otherwise contract for with a
        third party which such depreciation, amortization and interest payments
        are not in excess of what would otherwise have been charged for such
        third party's services, all as determined in accordance with generally
        accepted accounting principles, consistently applied, and when
        depreciation or amortization is permitted or required, the item shall be
        amortized over its reasonably anticipated useful life; (L) costs
        incurred by Landlord for alterations which are considered capital
        improvements and replacements under generally accepted accounting
        principles, consistently applied ("CAPITAL ITEMS"), except for Capital
        Items expressly permitted under Section 4.4(d)(x); (M) expenses in
        connection with services or other benefits which are not offered to
        Tenant but which are provided to another tenant or occupant of the
        Building or for which Tenant is charged directly; (N) costs incurred by
        Landlord due to the violation by Landlord or any other tenant of the
        Building of the terms and conditions of any lease of space in the
        Building unless directly related to the use or maintenance of the Common
        Areas; (O) overhead and profit increments paid to Landlord or to
        subsidiaries or affiliates of Landlord for services in the Building to
        the extent the same exceeds the cost of such services rendered at the
        same level of service for similar quality buildings in San Diego, by
        unaffiliated third parties on a competitive basis; (P) interest,
        principal, points and fees on debt or amortization on any mortgage or
        mortgages or any other debt instrument encumbering the Building; (Q)
        Landlord's general corporate overhead and general administrative
        expenses (provided that the reasonable rental cost of the Building
        office shall be included in Operating Expenses); (R) any compensation
        paid to clerks, attendants or other persons in commercial concessions
        operated by Landlord; (S) except in connection with making repairs or
        keeping permanent systems in operation while repairs are being made,
        rentals and other related expenses incurred in leasing air conditioning
        systems, elevators or other equipment ordinarily considered to be of a
        capital nature which if purchased, rather than rented, would constitute
        a Capital Item which is specifically excluded in (L) above, except
        equipment not affixed to the Building which is used in providing
        janitorial or similar services; (T) all items and services for which
        Tenant or any other tenant of the Building reimburses Landlord (other
        than through the pass-through of Operating Expenses) or which Landlord
        provides selectively to one or more tenants (other than Tenant) without
        reimbursement; (U) advertising and promotional expenditures, and costs
        of purchase and installation of signs in or on the Building (except for
        the Building directory) identifying the owner of the Building; (V)
        electrical power costs for which any tenant directly contracts with the
        local public service company; provided, however, that if any tenant
        directly contracts for electric power service during any portion of the
        relevant period, the total electric

                                      -4-
<PAGE>   12

        power costs for the Building shall be "grossed up" to reflect what those
        costs would have been had each tenant in the Building used the Building
        standard amount of electric power; (W) labor or other costs incurred in
        connection with any operation of any restaurant in the Building; (X)
        except as contemplated under Section 4.4(d)(x)(C) above, any costs,
        fines or penalties incurred due to violations by Landlord of any
        government rule or authority; (AA) purchase price of sculpture,
        paintings, or other objects of art placed in common areas of the
        Building; (BB) wages, salaries, medical, surgical and general welfare
        benefits, pension payments, payroll taxes, workers' compensation costs
        or other compensation paid to or for any executive employees above the
        grade of building manager; and (CC) costs (including in connection
        therewith all attorneys' fees and costs of settlement judgments and
        payments in lieu thereof) arising from claims, disputes or potential
        disputes in connection with potential or actual claims, litigation or
        arbitration pertaining to Landlord and/or the Project unless directly
        related to the use or maintenance of the Common Areas and not covered by
        insurance.

(e)     "TAX EXPENSES" shall mean all federal, state, county, or local
        governmental or municipal taxes, fees, charges or other impositions of
        every kind and nature, whether general, special, ordinary or
        extraordinary (including, without limitation, real estate taxes, general
        and special assessments, transit taxes or charges, business or license
        taxes or fees, annual or periodic license or use fees, open space
        charges, housing fund assessments, leasehold taxes or taxes based upon
        the receipt of rent, including gross receipts or sales taxes applicable
        to the receipt of rent, personal property taxes imposed upon the
        fixtures, machinery, equipment, apparatus, systems and equipment,
        appurtenances, furniture and other personal property used in connection
        with the Project), which Landlord shall pay or incur during any Expense
        Year (without regard to any different fiscal year used by such
        governmental or municipal authority) because of or in connection with
        the ownership, leasing and operation of the Project or Landlord's
        interest therein. Tax Expenses shall include, without limitation (i) any
        assessment, tax, fee, levy or charge in addition to, or in substitution,
        partially or totally, of any assessment, tax, fee, levy or charge
        previously included within the definition of Project tax, it being
        acknowledged by Tenant and Landlord that Proposition 13 was adopted by
        the voters of the State of California in the June 1978 election
        ("Proposition 13") and that assessments, taxes, fees, levies and charges
        may be imposed by governmental agencies for such services as fire
        protection, street, sidewalk and road maintenance, conservation, refuse
        removal and for other governmental services formerly provided without
        charge to property owners or occupants, and, in further recognition of
        the decrease in the level and quality of governmental services and
        amenities as a result of Proposition 13, Tax Expenses shall also include
        any governmental or private assessments or the Project's contribution
        towards a governmental or private cost-sharing agreement for the purpose
        of augmenting or improving the quality of services and amenities
        normally provided by governmental agencies. It is the intention of
        Tenant and Landlord that all such new and increased assessments, taxes,
        fees, levies, and charges and all similar assessments, taxes, fees,
        levies and charges be included within the definition of Tax Expenses for
        purposes of this Lease; (ii) any assessment, tax, fee, levy, or charge
        allocable to or measured by the area of the Premises or the rent payable
        hereunder, including, without limitation, any gross income tax with
        respect to the receipt of such rent, or upon or with respect to the
        possession, leasing, operating, management, maintenance, alteration,
        repair, use or occupancy by Tenant of the Premises, or any portion
        thereof; (iii) any assessment, tax, fee, levy or charge, upon this
        transaction or any document to which Tenant is a party, creating or
        transferring an interest or an estate in the Premises; (iv) any
        possessory taxes charged or levied in lieu of real estate taxes; and (v)
        any expenses incurred by Landlord in attempting to protest, reduce or
        minimize Tax Expenses. Notwithstanding anything to the contrary herein,
        there shall be excluded from Tax Expenses: (i) all excess profits taxes,
        franchise taxes, gift taxes, capital stock taxes, inheritance and
        succession taxes, estate taxes, federal and state income taxes, and
        other taxes to the extent applicable to Landlord's general or net income
        (as opposed to rents, receipts or income attributable to operations at
        the Project); and (ii) any items paid by Tenant under Section 10 of
        this Lease. Tax Expenses shall be adjusted to reflect an assumption that
        the Building is fully assessed for real property tax purposes as a
        completed building that is one hundred percent (100%) occupied with
        Building standard tenant improvements.

(f)     "UTILITIES COSTS" shall mean the cost of all utilities supplied for the
        Project (including, without limitation, water, sewer, electricity,
        telephone and HVAC), other than those utilities which are paid directly
        by Tenant and other tenants of the Project for excess consumption and
        after-hours HVAC pursuant to Section 16 of this Lease or similar
        provisions in other tenants' leases.

(g)     "TENANT'S PERCENTAGE" shall mean the percentage set forth in Section 1.9
        of the Summary. Tenant's Percentage was calculated by multiplying the
        number of rentable square feet of the Premises by 100 and dividing the
        product by the total rentable square feet in the Project. Landlord shall
        have the right from time to time, in its discretion, to include or
        exclude existing or future buildings in the Project in the calculation
        of the total rentable square feet of the Project, for purposes of
        determining Direct Expenses, Utilities Costs and/or the provision of
        various services and amenities thereto, including equitable allocation
        of Direct Expenses and/or Utilities Costs in Cost Pools (as described in
        Section 4.4(d) above); in such event, Tenants Percentage shall be
        appropriately revised to reflect any such actual increases or decreases
        in square footage of the Project. In addition, in the event either the
        rentable square feet of the Premises and/or the Building and other
        buildings in the Project is changed, Tenant's Percentage shall be
        appropriately adjusted, and, as to the Expense Year in which such change
        occurs, Tenant's Percentage for such year shall

                                      -5-
<PAGE>   13

        be determined on the basis of the number of days during such Expense
        Year that each such Tenant's Percentage was in effect.

4.5     CALCULATION AND PAYMENT OF ADDITIONAL RENT.

(a)     CALCULATION OF EXCESS. For each Expense Year ending or commencing within
        the Lease Term, Tenant shall pay to Landlord, in the manner set forth in
        Section 4.5(b), below, and as additional rent: (i) the amount by which
        Tenant's Percentage of Direct Expenses for such Expense Year exceeds
        Tenant's Percentage of the Direct Expenses for the Base Year (Tenant's
        Percentage of such excess amount is hereinafter referred to as the
        "EXCESS"); and (ii) Tenant's Percentage of the Utilities Costs incurred
        for such Expense Year.

(b)     STATEMENT OF ACTUAL DIRECT EXPENSES AND UTILITIES COSTS AND PAYMENT BY
        TENANT. Following the end of each Expense Year, Landlord shall give to
        Tenant a statement (the "STATEMENT"), which shall indicate: (i) the
        Direct Expenses incurred or accrued for such preceding Expense Year, and
        which shall indicate the amount, if any, of any Excess; and (ii) the
        amount of the Utilities Costs incurred for such preceding Expense Year.
        Upon receipt of the Statement for each Expense Year ending during the
        Lease Term, Tenant shall pay, within thirty (30) days after receipt of
        such Statement, (A) the full amount of any Excess for such Expense Year,
        less the amounts, if any, paid during such Expense Year as Estimated
        Excess, as that term is defined below, plus (B) the full amount of
        Tenant's Percentage of the Utilities Costs for such Expense Year, less
        the amounts, if any, paid by Tenant during the Expense Year as Estimated
        Utilities Cost, as that term is defined below. The failure of Landlord
        to timely furnish the Statement for any Expense Year shall not prejudice
        Landlord from enforcing its rights under this Section 4.5. Even though
        the Term has expired and Tenant has vacated the Premises, when the final
        determination is made of the Direct Expenses and Utilities Costs for the
        Expense Year in which this Lease terminates, taking into consideration
        that the expiration date may have occurred prior to the final day of the
        applicable Expense Year, Tenant shall within ten (10) days after
        Landlord's request therefor pay to Landlord an amount as calculated
        pursuant to the provisions of Section 4.5(a) of this Lease as Tenant's
        Percentage of the Excess and Utilities Costs for such final Expense
        Year. The provisions of this Section 4.5(b) shall survive the expiration
        or earlier termination of the Lease Term.

(c)     STATEMENT OF ESTIMATED DIRECT EXPENSES AND UTILITIES COSTS. In addition,
        Landlord shall give Tenant a yearly expense estimate statement (the
        "ESTIMATE STATEMENT") which shall set forth Landlord's reasonable
        estimate (the "ESTIMATE") of (i) what the total amount of Direct
        Expenses for the then-current Expense Year shall be and the estimated
        Excess (the "ESTIMATED EXCESS") as calculated by comparing Tenant's
        Percentage of Direct Expenses for such then-current Expense Year, which
        shall be based upon the Estimate, to Tenant's Percentage of Direct
        Expenses for the Base Year, and (ii) what the total amount of Tenant's
        Percentage of the Utilities Costs for the then current Expense Year
        shall be (the "ESTIMATED UTILITIES COSTS"). The Estimate Statement may
        be revised and reissued by Landlord from time to time. The failure of
        Landlord to timely furnish the Estimate Statement for any Expense Year
        shall not preclude Landlord from enforcing its rights to collect any
        Estimated Excess or Estimated Utilities Costs under this Section 4.5.
        Within thirty (30) days after receipt of such Estimate Statement, Tenant
        shall pay to Landlord an amount equal to (A) a fraction of the Estimated
        Excess (or the increase in the Estimated Excess if pursuant to a revised
        Estimate Statement) for the then-current Expense Year (reduced by any
        amounts paid as Estimated Excess pursuant to the last sentence of this
        Section 4.5(c), plus (B) a fraction of the Estimated Utilities Costs (or
        the increase in the Estimated Utilities Costs if pursuant to a revised
        Estimate Statement) for the then-current Expense Year (reduced by the
        amounts paid as Estimated Utilities Costs pursuant to the last sentence
        of this Section 4.5(c)). Such fraction shall have as its numerator the
        number of months which have elapsed in such current Expense Year to the
        month of such payment, both months inclusive, and shall have twelve (12)
        as its denominator. Until a new Estimate Statement is furnished, Tenant
        shall pay monthly, with the monthly Base Rent installments, an amount
        equal to the sum of (x) one-twelfth (1/12) of the total Estimated Excess
        plus (y) one-twelfth (1/12) of the total Estimated Utilities Costs set
        forth in the previous Estimate Statement delivered by Landlord to
        Tenant.

4.6     PROPOSITION 13 PROTECTION. Notwithstanding anything to the contrary
contained in this Lease, in the event that, at any time during the initial Term,
a change in ownership of the Project is consummated, and as a result thereof the
Project is reassessed (the "REASSESSMENT") for real estate tax purposes by the
appropriate governmental authority pursuant to the terms of Proposition 13, then
the terms of this Section 4.6 shall apply to such Reassessment. This Section 4.6
shall not apply during any Option Period.

(a)     THE TAX INCREASE. The term "TAX INCREASE" shall mean fifty percent (50%)
        of that portion of the Real Property Taxes and Assessments, as
        calculated immediately following the Reassessment, which is attributable
        solely to the Reassessment. Accordingly, the term Tax Increase shall not
        include any portion of the Real Property Taxes and Assessments, as
        calculated immediately following the Reassessment, which is attributable
        to (i) the initial assessment of the value of the Project, (ii)
        assessments which were pending immediately prior to the Reassessment and
        which were conducted during, and included in, such Reassessment, or were
        otherwise rendered unnecessary following the Reassessment, or (iii) the
        annual inflationary increase of Real Property Taxes and Assessments.

                                      -6-
<PAGE>   14

(b)     PROTECTION. During the initial Term, any Tax Increase will be excluded
        from Real Property Taxes and Assessments.

(c)     LANDLORD'S RIGHT TO PURCHASE THE PROPOSITION 13 PROTECTION AMOUNT. The
        amount of Real Property Taxes and Assessments which Tenant is not
        obligated to pay or will not be obligated to pay during the initial Term
        in connection with a particular Reassessment is referred to as a
        "PROPOSITION 13 PROTECTION AMOUNT." If the occurrence of a Reassessment
        is reasonably foreseeable by Landlord and the Proposition 13 Protection
        Amount attributable to such Reassessment can be reasonably quantified or
        estimated for each year commencing with the year in which the
        Reassessment will occur, the terms of this Section 4.6(c) shall apply to
        each such Reassessment. Upon notice to Tenant, Landlord shall have the
        right to purchase the Proposition 13 Protection Amount relating to the
        applicable Reassessment (the "APPLICABLE REASSESSMENT"), at any time, by
        paying to Tenant an amount equal to the Proposition 13 Purchase Price.
        The "PROPOSITION 13 PURCHASE PRICE" shall mean the present value of the
        Proposition 13 Protection Amount remaining during the initial Term, as
        of the date of payment of the Proposition 13 Purchase Price by Landlord.
        Such present value shall be calculated (i) by using the portion of the
        Proposition 13 Protection Amount attributable to each remaining year
        during the initial Term that such protection is available (as though the
        portion of such Proposition 13 Protection Amount benefited Tenant at the
        end of each year), as the amounts to be discounted, and (ii) by using
        discount rates for each amount to be discounted equal to (A) the prime
        interest rate, as reported in the Wall Street Journal as of the date of
        Landlord's exercise of its right to purchase plus (B) two percent (2%)
        per annum. Upon such payment of the Proposition 13 Purchase Price, the
        provisions of this Section 4.6 shall not apply to any Tax Increase
        attributable to the Applicable Reassessment. As Landlord will estimate
        the Proposition 13 Purchase Price because a Reassessment has not yet
        occurred, then when such Reassessment occurs, if Landlord has
        underestimated the Proposition 13 Purchase Price, then upon notice by
        Landlord to Tenant, Tenant's rent next due shall be credited with the
        amount of such underestimation, and if Landlord overestimates the
        Proposition 13 Purchase Price, then upon notice by Landlord to Tenant,
        rent next due shall be increased by the amount of the overestimation.

4.7     TENANT'S AUDIT RIGHTS. Landlord shall maintain records respecting Direct
Expenses and Utilities Costs and determine the same in accordance with sound
accounting and management practices, consistently applied. Tenant or Tenant's
Representative (for purposes hereof, Tenant's Representative shall mean an
independent certified public accountant whose fees are not paid on a contingency
fee basis) or both shall have the right, within six (6) months after receipt of
an Actual Statement, to examine at Tenant's cost and make copies of such records
at the Building upon reasonable prior notice and during business hours. If
Tenant takes exception to any matter contained in an Actual Statement, Landlord
shall promptly refer the matter to an independent certified public accountant
who has done no work for Landlord in the past five (5) years, whose
certification as to the proper amount shall be final and conclusive as between
Landlord and Tenant. Tenant shall pay the cost of such certification unless such
certification determines that Tenant was overbilled by more than five percent
(5%) in total in which case Landlord shall pay the cost of the certification and
all of Tenant's reasonable out-of-pocket costs in reviewing Landlord's records
or in having them reviewed by Tenants Representative (provided, that the total
out-of-pocket costs shall not exceed Two Thousand Dollars ($2,000.00)).
Appropriate adjustments in amounts paid by Tenant shall be settled in cash
within thirty (30) days.

5.      SECURITY DEPOSIT.

5.1     CASH SECURITY DEPOSIT. Concurrently with the execution of this Lease,
Tenant shall deposit with Landlord the cash portion of the Security Deposit
designated in Section 1.11 of the Summary (the "CASH SECURITY DEPOSIT"). The
Cash 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. 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 Cash 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. If any portion of the Cash 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 Cash
Security Deposit to its original amount. Landlord shall not be required to keep
the Cash Security Deposit separate from its general funds, and Tenant shall not
be entitled to interest on the Cash Security Deposit. If Tenant shall fully and
faithfully perform every provision of this Lease to be performed by it, the Cash
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 Cash Security Deposit until such time as any amount due from Tenant
in accordance with this Lease has been determined and paid in full (however, if
the amount payable by Tenant is less than the Cash Security Deposit, Landlord
shall return to Tenant an amount equal to the difference between the Cash
Security Deposit and the amount payable by Tenant). If Landlord sells its
interest in the Building during the Term and if Landlord deposits with the
purchaser the Cash Security Deposit (or balance thereof), and such purchaser
acknowledges receipt thereof, then, upon such sale, Landlord shall be discharged
from any further liability with respect to the Cash Security Deposit.

                                      -7-
<PAGE>   15

5.2     LETTER OF CREDIT SECURITY DEPOSIT.

(a)     DELIVERY. Concurrently with Tenant's execution of this Lease, Tenant
        shall deliver to Landlord an unconditional, irrevocable and renewable
        letter of credit issued by Imperial Bank ("LETTER OF CREDIT") in favor
        of Landlord in form reasonably satisfactory to Landlord, in the initial
        principal amount specified in Section 1.1 of the Summary, as security
        for the faithful performance and observance by Tenant of the terms,
        provisions and conditions of this Lease. The Letter of Credit shall
        state that an authorized officer or other representative of Landlord may
        make demand on Landlord's behalf for the amount owed by Tenant to
        Landlord, and that the issuing bank must immediately honor such demand,
        without qualification or satisfaction of any conditions, except the
        proper identification of the party making such demand and the reason
        that the party is making the demand. In addition, the Letter of Credit
        shall indicate that it is transferable in its entirety by Landlord as
        beneficiary and that upon receiving written notice of transfer, and upon
        presentation to the issuer of the original Letter of Credit, the issuer
        will reissue the Letter of Credit naming such transferee as the
        beneficiary. If the term of the Letter of Credit held by Landlord will
        expire prior to thirty (30) days following the expiration date of this
        Lease and it is not extended, or a new Letter of Credit for an extended
        period of time is not substituted, within thirty (30) days prior to the
        expiration of the Letter of Credit, then Landlord may deliver written
        notice of such fact to Tenant and if Tenant does not extend the Letter
        of Credit or substitute a new Letter of Credit within ten (10) days
        after Tenant's receipt of such notice from Landlord, Landlord shall be
        entitled to make demand for the principal amount of said Letter of
        Credit and, thereafter, to hold such funds in accordance with Section
        5.2(c) below.

(b)     PRINCIPAL AMOUNT OF LETTER OF CREDIT. The required principal amount of
        the Letter of Credit shall be as follows:

<TABLE>
<CAPTION>
                                                     REQUIRED
                    YEAR OF TERM                 PRINCIPAL AMOUNT
                    ------------                 ----------------
                    <S>                          <C>
                         1                         $360,000.00
                         2                         $240,000.00
                         3                         $120,000.00
                       4-7                               $0.00
</TABLE>

        Notwithstanding the foregoing, if as of the applicable reduction date
        set forth above, (i) Tenant is in default under this Lease, or (ii)
        circumstances exist that would, with notice or lapse of time, or both,
        constitute a default (provided Landlord has given Tenant written notice
        of the existence of any such circumstances by the applicable reduction
        date), then the principal amount shall not be reduced, unless and until
        such default or circumstances shall have been fully cured, at which time
        the principal amount may be reduced as hereinabove described. If Tenant
        completes an initial public offering of its securities on a recognized
        United States public securities exchange, then Tenant shall have the
        right, upon prior written notice to Landlord, to eliminate the Letter of
        Credit provided that (i) at the time of Tenant's request, Tenant shall
        have a tangible net worth of at least Thirty Million Dollars
        ($30,000,000.00) (Tenant shall provide Landlord with evidence reasonably
        acceptable to Landlord evidencing such tangible net worth), (ii) at the
        time of Tenant's request, Tenant is not in default hereunder and no
        circumstances exists that would, with the passage of time, the giving of
        notice, or both, constitute a default hereunder (provided Landlord has
        given Tenant written notice of the existence of any such circumstances
        within three (3) business days following receipt of Tenant's request)
        and (iii) Landlord shall have not given Tenant written notice of a
        failure to pay rent pursuant to Section 23.1(b) during the preceding
        twelve (12) month period.

(c)     APPLICATION OF LETTER OF CREDIT. The Letter of Credit shall be held by
        Landlord as security for the faithful performance by Tenant of all of
        the terms, covenants and conditions of this Lease. If Tenant commits a
        default with respect to any provision of this Lease, Landlord may (but
        shall not be required to) draw upon the Letter of Credit and use, apply
        or retain all or any part of the proceeds for the payment of any sum
        which is in default, or for the payment of any other amount which
        Landlord may spend or become obligated to spend by reason of Tenant's
        default or to compensate Landlord for any loss or damage which Landlord
        may suffer by reason of Tenant's default. If any portion of the Letter
        of Credit is so used or applied, Tenant shall, within ten (10) days
        after demand therefor, post an additional Letter of Credit in an amount
        sufficient to restore the Letter of Credit to the principal amount
        required under Section 5.2(b) above. Landlord shall not be required to
        keep any proceeds from the Letter of Credit separate from its general
        funds and Tenant shall not be entitled to any interest on such proceeds.
        Should Landlord sell its interest in the Premises during the Term and if
        Landlord deposits with the purchaser thereof the Letter of Credit or any
        proceeds of the Letter of Credit, thereupon Landlord shall be discharged
        from any further liability with respect to the Letter of Credit and said
        proceeds.

6.      USE.

6.1     GENERAL. Tenant shall use the Premises solely for the Permitted Use
specified in Section 1.12 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

                                      -8-
<PAGE>   16

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 or the Building 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 Project and all laws, statutes, codes, rules and
regulations now or hereafter in force relating to or affecting the use,
occupancy, alteration or improvement of the Premises, including, without
limitation, the provisions of Title III of the Americans with Disabilities Act
of 1990 ("ADA") as it pertains to Tenant's use, occupancy, improvement and
alteration of the Premises. Tenant shall not use or allow the Premises to be
used (a) in violation of any recorded covenants, conditions and restrictions
affecting the Site or of any law or governmental rule or regulation, or of any
certificate of occupancy issued for the Premises or Building, 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 the Building, or injure
or annoy them. Tenant shall not cause, maintain or permit any nuisance in, on or
about the Premises, the Building, the Project or the Site, nor commit or suffer
to be committed any waste in, on or about the Premises. Notwithstanding the
foregoing, Tenant's obligation to observe and comply with future covenants,
conditions and restrictions shall be (i) subject to Tenants receipt of a copy
thereof and (ii) conditioned upon them not reducing Tenant's rights or
increasing Tenant's obligations hereunder in any material respect.

6.2     PARKING.

(a)     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 spaces specified in Section 1.16 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 spaces designated in Section 1.16 of the Summary. In
addition, Landlord may, in its sole discretion, assign any unreserved and
unassigned parking spaces, and/or make all or a portion of such spaces reserved.

(b)     PARKING CHARGES. Tenant's parking spaces set forth in Section 1.16 of
the Summary hereof shall, during the Term (including any Option Term), not be
subject to a monthly parking fee (during an Option Term, such rights will be
reflected in the determination of the fair market rental rate). In addition to
such parking privileges for use by Tenant's employees, Landlord shall permit
access to the parking areas for Tenant's visitors, subject to availability of
spaces and payment (by validation charges or otherwise) of daily visitor parking
charges therefor as may be established and adjusted by Landlord from time to
time. Tenant acknowledges that Landlord may restrict the parking structure, or
portions thereof, from parking by Tenant's visitors (but not Tenant's
employees).

(c)     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, nondiscriminatory 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, sports utility vehicles 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; provided, however, Landlord will not charge
Tenant the cost thereof unless Landlord previously gave Tenant written or oral
notice of such prohibited activity and such activity was not corrected within a
reasonable period of time under the circumstances (however, no notice will be
required in the event of an emergency or with respect to a violator of whom
Landlord has previously given notice to Tenant).

6.3     SIGNS.

(a)     BUILDING SIGNAGE. Subject to the terms of this Section 6.3(b), Tenant
        shall have the right to install, at Tenant's sole cost and expense, (i)
        exclusive Building top signage in one (1) location on the exterior of
        the Building, (ii) non-exclusive monument signage in one (1) location on
        the Building's monument sign, but only if Landlord elects to provide a
        monument sign for the Building, (iii) a nonexclusive lobby signage in
        one (1) location in the ground floor lobby of the Building and (iv)
        exclusive signage in the fourth (4th), fifth (5th) and sixth (6th) floor
        elevator lobbies of the Premises

                                      -9-
<PAGE>   17
        (collectively, "TENANT'S SIGNAGE"). The location of Tenant's Signage
        shall be determined by Landlord and approved by Tenant, such approval
        not to be unreasonably withheld. Notwithstanding the foregoing, Tenant's
        right to Tenant's Signage is personal to the original Tenant named in
        the Summary ("ORIGINAL TENANT") and shall not be assignable to any
        assignee or transferee of or any successor to Tenant's interest under
        this Lease, except with the prior written consent of Landlord, which
        consent shall not be unreasonably withheld. The foregoing restriction is
        a material consideration to Landlord because of the visibility of such
        signage and because of Landlord's concern for maintaining the quality,
        stature and prestige of the Building. Tenant's Signage shall conform to
        sign plans approved by Landlord, which approval shall not be
        unreasonably withheld or delayed, and comply with all applicable laws,
        statutes, regulations, ordinances and restrictions, including but not
        limited to, any permit requirements and City of San Diego size
        restrictions. Tenant shall install and maintain Tenants Signage in good
        condition and repair at its sole cost and expense during the entire
        Term, as the same may be extended for any Option Term. Tenant shall bear
        all costs and expenses associated with Tenant's Signage, including but
        not limited to, expenses of design, acquisition, construction,
        installation, display, illumination, maintenance, repair and permit
        costs therefor. Tenant shall be solely responsible for obtaining all
        permits and approvals required by any governmental agency or authority
        with respect to Tenant's Signage. Except as provided above, Tenant shall
        not place, erect or maintain or cause to be placed, erected or
        maintained on or to the roof or any exterior door, wall or window or the
        roof of the Premises or the Building, or on or to the glass or any
        window or door of the Premises, or on or to any sidewalk or other
        location outside the Premises, or within any entrance to the Premises,
        any sign, decal, banner, placard, or any other advertising matter of any
        kind or description. Any modifications to Tenant's Signage, including
        without limitation, the location, quality, design, style, lighting and
        size of such signage, shall be consistent with applicable laws, rules
        and permits and Landlord's Building standard signage program and shall
        be subject to Landlord's prior written approval, in its reasonable
        discretion. Upon the expiration or earlier termination of this Lease,
        Tenant shall be responsible, at its sole cost and expense, for the
        removal of Tenant's Signage and the repair of all damage to the Building
        caused by such removal.

(b)     PROHIBITED SIGNAGE AND OTHER ITEMS. Any signs, notices, logos, pictures,
        names or advertisements which are installed and that have not been
        separately approved by Landlord may be removed without notice by
        Landlord at the sole expense of Tenant. Except as hereinabove mentioned,
        Tenant may not install any signs on the exterior or roof of the Building
        or the Building Common Areas or the Project. Any signs, window
        coverings, or blinds (even if the same are located behind the Landlord
        approved window coverings for the Building), or other items visible from
        the exterior of the Premises or Building are subject to the prior
        written approval of Landlord, in its sole discretion.

(c)     BUILDING DIRECTORY. Tenant shall, at Landlord's expense, be entitled to
        a reasonable number of lines on the Building directory to display
        Tenant's name and suite numbers

6.4     HAZARDOUS MATERIALS.

(a)     TENANT'S OBLIGATIONS. Except for ordinary and general office supplies,
        such as copier toner, liquid paper, glue, ink and common household
        cleaning materials (some or all of which may constitute "HAZARDOUS
        MATERIALS" as defined in this Lease), Tenant agrees not to cause or
        permit any Hazardous Materials to be brought upon, stored, used,
        handled, generated, released or disposed of on, in, under or about the
        Premises, 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. 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 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 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
        following reasonable prior

                                      -10-
<PAGE>   18

        written notice (except in the event of an emergency), 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. As used in this Lease, the term "HAZARDOUS MATERIALS" shall
        mean and include any hazardous or toxic materials, substances or wastes
        as now or hereafter designated under any law, statute, ordinance, rule,
        regulation, order or ruling of any agency of the State, the United
        States Government or any local governmental authority, including,
        without limitation, asbestos, petroleum, petroleum hydrocarbons and
        petroleum based products, urea formaldehyde foam insulation,
        polychlorinated biphenyls ("PCBs"), and freon and other
        chlorofluorocarbons. The provisions of this Section 6.4(a) will survive
        the expiration or earlier termination of this Lease.

(b)     LANDLORD'S OBLIGATIONS. Landlord represents and warrants to Tenant that
        as of the date of this Lease and to Landlord's actual knowledge (i)
        there are no Hazardous Materials in, on, under, below or otherwise
        located on or about the Building in violation of applicable law, and
        (ii) there has been no release or migration of any Hazardous Materials
        in violation of applicable law onto, beneath, upon or about the
        Building. Landlord shall indemnify, protect, defend and hold Tenant, its
        successors, assigns, subtenants, agents, employees, officers and
        directors harmless from any and all losses, damages, liabilities,
        judgments, costs, claims, expenses, penalties, including, but not
        limited to, attorneys' fees, court costs and consultant fees (i) arising
        out of or involving any Hazardous Materials existing on the Building to
        the extent caused by Landlord; or (ii) due to Landlord's breach of its
        foregoing representation. The provisions of this Section 6.4(b) will
        survive the expiration or earlier termination of this Lease.

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 person and/or at such other place
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.

8.      BROKERS. The parties recognize that the broker(s) who negotiated this
Lease are stated in Section 1.13 of the Summary, and agree that Landlord shall
be solely responsible for the payment of brokerage commissions to said broker(s)
pursuant to a separate agreement between Landlord and such broker(s), and that
Tenant shall have no responsibility therefor unless written provision to the
contrary has been made. Each party represents and warrants to the other, that,
to its knowledge, no other broker, agent or finder (a) negotiated or was
instrumental in negotiating or consummating this Lease on its behalf, and (b) is
or might be entitled to a commission or compensation in connection with this
Lease. Any broker, agent or finder of Tenant whom Tenant has failed to disclose
herein shall be paid by Tenant. Tenant shall indemnify, 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. Landlord shall
indemnify, 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. 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
exclusive possession of the Premises to Landlord broom clean and in good
condition and repair, reasonable wear and tear excepted (and casualty damage
excepted if not required to be repaired by Landlord or Tenant or 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

                                      -11-
<PAGE>   19

under Section 12.4 and the other provisions of this Lease (but provided Landlord
has given Tenant written notice at least sixty (60) days prior to the expiration
or earlier termination of this Lease that Landlord needs possession of the
Premises immediately following the expiration or earlier termination of this
Lease), Tenant shall indemnify, protect, defend (by counsel approved in writing
by Landlord) and hold Landlord harmless from and against any and all claims,
judgments, suits, causes of action, damages, losses, liabilities and expenses
(including attorneys' fees and court costs) resulting from such failure to
surrender, including, without limitation, any claim made by any succeeding
tenant based thereon. The foregoing indemnity shall survive the expiration or
earlier termination of this Lease.

9.2     HOLD OVER WITH LANDLORD'S CONSENT. If, with Landlord's express written
consent, Tenant remains in possession of the Premises after the expiration or
earlier termination of the Lease Term, Tenant shall become a tenant from
month-to-month upon the terms and conditions set forth in this Lease (including
Tenant's obligation to pay all Direct Expenses and Utilities Costs and any other
additional rent under this Lease), but at a Monthly Basic Rent equal to the
greater of: (a) one hundred fifty percent (150%) of the Monthly Basic Rent
applicable to the Premises immediately prior to the date of such expiration or
earlier termination; or (b) one hundred twenty-five percent (125%) 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. Tenant shall pay an entire month's Monthly
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. This Section 9.2 shall not be construed to create any expressed or
implied right to holdover beyond the expiration of the Lease Term or any
extension thereof.

9.3     HOLD OVER WITHOUT LANDLORD'S CONSENT. If Tenant holds over after the
expiration or earlier termination of the Lease Term without the express written
consent of Landlord, then, in addition to all other remedies available to
Landlord, Tenant shall become a tenant at sufferance only, upon the terms and
conditions set forth in this Lease so far as applicable (including Tenant's
obligation to pay all Direct Expenses and Utilities Costs and any other
additional rent under this Lease), but at a Monthly Basic Rent equal to the
greater of: (a) one hundred fifty percent (150%) of the Monthly 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 an entire month's Monthly
Basic Rent calculated in accordance with this Section 9.3 for any portion of a
month it holds over and remains in possession of the Premises pursuant to this
Section 9.3.

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

10.     TAXES ON TENANT'S PROPERTY. Tenant shall be liable for, and shall pay
before delinquency, all taxes and assessments (real and personal) levied against
(a) any personal property or trade fixtures placed by Tenant in or about the
Premises (including any increase in the assessed value of the Premises based
upon the value of any such personal property or trade fixtures); and (b) any
Tenant Improvements or alterations in the Premises (whether installed and/or
paid for by Landlord or Tenant) to the extent such items are assessed at a
valuation higher than the valuation at which tenant improvements conforming to
the Building's standard tenant improvements are assessed. 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.     CONDITION OF PREMISES; REPAIRS.

11.1    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, the Site or the Project or their condition, or with respect to the
suitability thereof for the conduct of Tenant's business. The taking of
possession of the Premises by Tenant shall conclusively establish that the
Project, the Site, 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,
except for patent and latent defects not caused by Tenant for which Landlord is
responsible to repair pursuant to the terms of this Lease.

11.2    LANDLORD'S REPAIR OBLIGATIONS. Subject to Section 18.1 and 18.2 of this
Lease, Landlord shall, at its sole cost and expenses and not as part of the
Operating Expenses, repair, maintain and replace, as necessary the Base, Shell
and Core of the Building and other structural portions of the Building and the
Common Areas (including structural walls, concrete sub-flooring, structural
elements of the roof, foundations and underground utilities, except where the
utility company has assumed such responsibility).

                                      -12-
<PAGE>   20

Subject to Sections 18.1 and 18.2 of this Lease, Landlord shall, as part of
Operating Expenses, repair, maintain and repair, as necessary (a) the Building
systems, including, without limitation, the basic heating, ventilating, air
conditioning ("HVAC"), sprinkler and electrical systems within the Building core
and standard conduits, connections and distribution systems thereof within the
Premises and Building standard restrooms (but not the Tenant Improvements or any
above standard improvements installed in the Premises such as, for example, but
not by way of limitation, custom lighting, special or supplementary HVAC or
plumbing systems or distribution extensions, special or supplemental electrical
panels or distribution systems, or kitchen or restroom facilities and appliances
to the extent such facilities and appliances are intended for the exclusive use
of Tenant), and (b) the Common Areas. Notwithstanding the foregoing, 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 and are not covered by the insurance
maintained or required to be maintained hereunder by Landlord, Tenant shall pay
to Landlord, as additional rent, the costs of such maintenance, repairs and
replacements. Landlord shall not be liable to Tenant for failure to perform any
such maintenance, repairs or replacements, unless Landlord shall fail to make
such maintenance, repairs 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 under any law, statute or ordinance now or
hereafter in effect (including the provisions of California Civil Code Section
1942 and any successive sections or statutes of a similar nature).

11.3    TENANT'S REPAIR OBLIGATIONS. Except for Landlord's obligations
specifically set forth in Sections 11.1. 11.2, 16.1, 18.1 and 19.2 hereof,
Tenant shall at all times and at Tenant's sole cost and expense, keep, maintain,
clean, repair, preserve and replace, as necessary, the Premises and all parts
thereof including, without limitation, all Tenant Improvements, Tenant Changes,
utility meters, all special or supplemental HVAC systems, electrical systems,
pipes and conduits, located within the Premises, all fixtures, furniture and
equipment, Tenant's storefront (if any), Tenant's signs, locks, closing devices,
security devices, windows, window sashes, casements and frames, floors and floor
coverings, shelving, kitchen and/or restroom facilities and appliances located
within the Premises to the extent such facilities and appliances are intended
for the exclusive use of Tenant, if any, custom lighting, and any alterations,
additions and other property located within the Premises in first-class
condition and repair, reasonable wear and tear excepted. Tenant shall replace,
at its expense, any and all interior glazing, doors and plate and other glass in
the Premises (but not Building windows or doors) 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 first-class 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. After installation of the initial Tenant
Improvements for the Premises pursuant to Exhibit "C", Tenant may, at its sole
cost and expense, make alterations, additions, improvements and decorations to
the Premises (collectively, "TENANT CHANGES") subject to and upon the following
terms and conditions:

(a)     Notwithstanding any provision in this Section 12 to the contrary, Tenant
        is absolutely prohibited from making any alterations, additions,
        improvements or decorations which: (i) affect any area outside the
        Premises; (ii) affect the Building's structure, equipment, services or
        systems, or the proper functioning thereof, or Landlord's access
        thereto; (iii) affect the outside appearance, character or use of the
        Project, the Building or the Common Areas; (iv) weaken or impair the
        structural strength of the Building; (v) in the reasonable opinion of
        Landlord, lessen the value of the Project or Building; or (vi) will
        violate or require a change in any occupancy certificate applicable to
        the Premises.

(b)     Before proceeding with any Tenant Change which is not otherwise
        prohibited in Section 12.1(a) above, Tenant must first obtain Landlord's
        written approval thereof (including approval of all plans,
        specifications and working drawings for such Tenant Change), which
        approval shall not be unreasonably withheld or delayed. However,
        Landlord's prior approval shall not be required for any Tenant Change
        (other than Tenant Changes for the Patio) which satisfies the following
        conditions (hereinafter a "PRE-APPROVED CHANGE"): (i) the costs of such
        Tenant Change does not exceed Five Thousand Dollars ($5,000.00)
        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 Fifty Thousand Dollars ($50,000.00); (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; and (iv) Tenant and such Tenant Change
        otherwise satisfy all other conditions set forth in this Section 12.1.
        In addition to obtaining Landlord's consent to Tenant Changes for the
        Patio pursuant to the first sentence of this Section 12.(b), Tenant must
        obtain Landlord's consent (which may not be unreasonably withheld or
        delayed) to the placement of any furniture or plants on the Patio if the
        same are visible from other locations of the Project.

                                      -13-
<PAGE>   21
(c)     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(b)
        above), Tenant shall: (i) enter into an agreement for the performance of
        such Tenant Changes with such contractors and subcontractors selected by
        Tenant and approved by Landlord, which approval shall not be
        unreasonably withheld or delayed; (ii) before proceeding with any Tenant
        Change (including any Pre-Approved 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. However, Landlord shall be required to
        include the Tenant Changes under such insurance only to the extent such
        insurance is actually obtained by Landlord and such Tenant Changes are
        insurable under such insurance; if such Tenant Changes are not or cannot
        be 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) if
        required by Landlord, a completion and lien indemnity bond, or other
        surety, satisfactory to Landlord for any such Tenant Change that is in
        excess of Fifty Thousand Dollars ($50,000.00). 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).

(d)     Tenant shall pay to Landlord, as additional rent, the reasonable and
        actual costs of Landlord's engineers and other consultants (but not
        Landlord's on-site management personnel) for review of all plans,
        specifications and working drawings for the Tenant Changes, within ten
        (10) business days after Tenant's receipt of invoices either from
        Landlord or such consultants. In addition to such costs, Tenant shall
        pay to Landlord, within ten (10) business days after completion of any
        Tenant Change, the actual, reasonable costs incurred by Landlord for
        services rendered by Landlord's management personnel and engineers to
        coordinate and/or supervise any of the Tenant Changes to the extent such
        services are provided in excess of or after the normal on-site hours of
        such engineers and management personnel.

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

(f)     Throughout the performance of the Tenant Changes, Tenant shall obtain,
        or cause its contractors to obtain, workers compensation insurance and
        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 Tenant at
any time prior to the date which is thirty (30) days before the expiration of
the Lease Term (or immediately upon any sooner termination of this Lease)
identify those items of the Tenant Improvements and Tenant Changes which
Landlord shall require Tenant to remove at the end of the Term of this Lease.
Notwithstanding the foregoing (i) Landlord may only require Tenant to remove
those items of the initial Tenant Improvements by giving Tenant written notice
of such requirement at the time of Landlord's approval thereof and (ii) Landlord
may only require Tenant to remove Tenant Changes for which Tenant has requested
Landlord's approval if, at the time of Tenant's request for approval, Tenant
also requested Landlord to make such election at that time and Landlord actually
gave Tenant written notice at the time of Landlord's approval that Landlord
would require the removal of the Tenant Changes. 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 if Landlord actually removes such items).

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 moveable 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 promptly 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

                                      -14-
<PAGE>   22

by Landlord for removal pursuant to Section 12,2 above, or if Tenant fails to
comply with its obligations under Section 12.3, 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.

12.5    BACKUP GENERATOR AND SUPPLEMENTAL HVAC. Subject to Landlord's prior
approval of all plans and specifications, which approval shall not be
unreasonably withheld, and compliance with the provisions of Section 12 of this
Lease, Landlord shall permit Tenant to install and maintain, at Tenant's sole
cost and expense, a backup diesel-powered generator at the location shown on
Exhibit "A" and/or a supplemental HVAC unit at a location designated by Landlord
and reasonably acceptable to Tenant. Such backup generator shall be used by
Tenant only during (i) testing and regular maintenance, and (ii) any period of
electrical power outage in the Project. Tenant shall be entitled to operate the
generator for testing and regular maintenance only at times reasonably approved
by Landlord. Tenant shall submit the specifications for design, operation,
installation and maintenance of the backup generator and supplemental HVAC unit
for Landlord's consent, which consent shall not be unreasonably withheld or
delayed and may be conditioned on Tenant complying with such reasonable
requirements imposed by landlord, based on the advice of Landlord's structural
and mechanical engineers, so that the Project's systems and equipment are not
adversely affected. Any repairs and maintenance of such generator and
supplemental HVAC unit shall be the sole responsibility of Tenant and Landlord
makes no representation or warranty with respect to such generator. The backup
generator will be considered to be Tenant's personal property (and not Tenant
Changes or Tenant Improvements), will not constitute a Tenant Improvement
Allowance Item and will constitute a portion of the Premises for purposes of
Sections 17 and 20. The supplemental HVAC unit will be considered to be a Tenant
Change, will constitute a Tenant Improvement Allowance Item and will constitute
a portion of the Premises for purposes of Sections 17 and 20.

12.6    TENANT SECURITY SYSTEM. Subject to Landlord's prior approval of all
plans and specifications, which approval shall not be unreasonably withheld, and
in compliance with the provisions of Section 12 of this Lease, Landlord shall
permit Tenant, at Tenant's sole cost and expense, to integrate Tenant's security
system into the Building system and install card readers in the stairwells so
that Tenant's employees can use the stairwells to transition between floors of
the Premises. Tenant's obligations under Section 17.2 of this Lease shall also
apply to Tenant's use and operation of such security system, and such security
system shall be considered a Tenant Change.

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 Site, 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, unconditional
and final lien releases (and other 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 to Landlord's reasonable satisfaction so
that it no longer affects title to the Project, the Site, 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 and upon not less than five (5) days' prior written notice to Tenant
(except no notice will be required if doing so would subject the Project to
foreclosure by the lien), 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.

14.     ASSIGNMENT AND SUBLETTING.

14.1    RESTRICTION ON TRANSFER. Except as otherwise expressly provided in this
Section 14, Tenant shall not, without the prior written consent of Landlord,
which consent Landlord will not unreasonably withhold, assign this Lease or any
interest herein or sublet the Premises or any part thereof, or permit the use or
occupancy of the Premises by any party other than Tenant (any such assignment,
encumbrance, sublease, license or the like shall sometimes be referred to as a
"TRANSFER"). In no event may Tenant encumber this Lease. Any Transfer without
Landlord's consent (except for a Permitted Transfer pursuant to Section 14.2
below) shall constitute a default by Tenant under this Lease, and in addition to
all of Landlord's other remedies at law, in equity or under this Lease, such
Transfer shall be voidable at Landlord's election. In addition, this Lease shall
not, nor shall any Interest of Tenant herein, be assignable by operation of law
without the written consent of Landlord. For purposes of this Section 14, other
than with respect to a Permitted Transfer under Section 14.2 and transfers of
stock of Tenant if Tenant is a publicly-held corporation (or will be in the case
of an initial public offering) and such stock is

                                      -15-
<PAGE>   23

transferred publicly over a recognized security exchange or over-the-counter
market, if Tenant is a corporation, partnership or other entity, any transfer,
assignment, encumbrance or hypothecation of forty percent (40%) or more
(individually or in the aggregate) of any stock or other ownership interest in
such entity, and/or any transfer, assignment, hypothecation or encumbrance of
any controlling ownership or voting interest in such entity, shall be deemed an
assignment of this Lease and shall be subject to all of the restrictions and
provisions contained in this Section 14. The reincorporation of Tenant in
another state in the United States will not constitute an assignment provided
(i) the newly incorporated entity assumes, as a matter of law, the obligations
of Tenant hereunder; (ii) the newly incorporated entity has a net worth that is
not less than the net worth of Tenant immediately prior to such reincorporation
and (iii) Tenant gives Landlord written notice of such reincorporation and
evidence that the conditions in clauses (i) and (ii) have been satisfied within
ten (10) days following such reincorporation.

14.2    PERMITTED TRANSFERS. Notwithstanding the provisions of Sections 14.1
above to the contrary, Tenant may assign this Lease or sublet the Premises or
any portion thereof (herein, a "PERMITTED TRANSFER"), without Landlord's consent
and without extending any sublease option to Landlord, to any corporation which
controls, is controlled by or is under common control with Tenant, or to any
corporation resulting from a merger or consolidation with Tenant, or to any
person or entity which acquires all the assets of Tenant's business as a going
concern, 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 described in
Section 14.3 below; (b) if 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); (c) the financial net worth of the assignee or
sublessee equals or exceeds that of Tenant as of the date of execution of this
Lease; (d) Tenant remains fully liable under this Lease; (e) the use of the
Premises under Article 6 remains unchanged; and (f) such transaction is not
entered into as a subterfuge to avoid the restrictions and provisions of this
Section 14.

14.3    LANDLORD'S OPTIONS. If at any time or from time to time during the Term
Tenant desires to effect a Transfer, Tenant shall deliver to Landlord written
notice ("TRANSFER NOTICE") setting forth the terms and provisions of the
proposed Transfer and the identity of the proposed assignee, sublessee or other
transferee (sometimes referred to hereinafter as a "TRANSFEREE"). Tenant shall
also deliver to Landlord with the Transfer Notice, a current financial statement
and financial statements for the preceding two (2) years of the Transferee (to
the extent the Transferee has been in existence for such period) which have been
certified by an authorized officer of such Transferee or by a reputable
independent accounting firm acceptable to Landlord, and such other information
concerning the business background and financial condition of the proposed
Transferee as Landlord may reasonably request. Except with respect to a
Permitted Transfer, Landlord shall have the option, exercisable by written
notice delivered to Tenant within ten (10) business days after Landlord's
receipt of the Transfer Notice, such financial statements and other information,
either to:

(a)     approve or disapprove such Transfer, which approval shall not be
        unreasonably withheld; or

(b)     in the event the Transfer is a sublease of the entire Premises ("SPECIAL
        SUBLEASE"), terminate this Lease with respect to the entire Premises and
        recapture the Premises, which termination shall be effective thirty (30)
        days after Tenant's receipt of Landlord's notice; provided, however,
        Tenant may nullify such termination by giving Landlord written notice,
        within ten (10) business days following Tenant's receipt of Landlord's
        termination notice, that Tenant has rescinded the proposed Transfer.

14.4    ADDITIONAL CONDITIONS; EXCESS RENT. If Landlord approves of the proposed
Transfer pursuant to Section 14.3(a) above, Tenant may enter into the proposed
Transfer with such proposed Transferee subject to the following further
conditions:

(a)     the Transfer shall be on the same terms set forth in the Transfer Notice
        delivered to Landlord (if the terms have changed, Tenant must submit a
        revised Transfer Notice to Landlord and Landlord shall have another
        twenty (20) days after receipt thereof to make the election in Sections
        14.3(a) or 14.3(b) above);

(b)     no Transfer shall be valid and no Transferee shall take possession of
        the Premises until an executed counterpart of the assignment, sublease
        or other instrument affecting the Transfer has been delivered to
        Landlord pursuant to which the Transferee shall expressly assume all of
        Tenant's obligations under this Lease (or with respect to a sublease of
        a portion of the Premises or for a portion of the Term, all of Tenant's
        obligations applicable to such portion);

(c)     no Transferee shall have a further right to assign, encumber or sublet,
        except on the terms herein contained; and

(d)     if any rent or other economic consideration received by Tenant as a
        result of such Transfer exceeds, in the aggregate, (i) the total rent
        which Tenant is obligated to pay Landlord under this Lease (prorated to
        reflect obligations allocable to any portion of the Premises subleased),
        plus (ii) any reasonable brokerage commissions, attorneys' fees, tenant
        improvements and moving costs actually paid by Tenant in connection with
        such Transfer, then fifty percent (50%) of such

                                      -16-
<PAGE>   24

        excess shall be paid to Landlord within ten (10) days after receipt
        thereof as additional rental under this Lease, without affecting or
        reducing any other obligations of Tenant hereunder.

14.5    REASONABLE DISAPPROVAL. Landlord and Tenant hereby acknowledge that
Landlord's disapproval of any proposed Transfer (other than a Permitted
Transfer) pursuant to Section 14.3(a) shall be deemed reasonably withheld if
based upon any reasonable factor, including, without limitation, any or all of
the following factors: (a) the proposed Transfer would result in more than two
subleases of portions of the Premises being in effect at any one time during the
Term; (b) the net effective rent payable by the Transferee (adjusted on a
rentable square foot basis) is less than the net effective rent then being
quoted by Landlord for new leases in the Building for comparable size space for
a comparable period of time (however, this factor may only be considered if
Landlord has space at the Project that can satisfy such Transferee's space
needs); (c) the proposed Transferee is an existing tenant of the Project (and
Landlord has space at the Project that can satisfy such Transferee's space
needs) or the proposed Transferee is negotiating with Landlord (or has
negotiated with Landlord in the last two (2) months) for space in the Project;
(d) the portion of the Premises to be sublet or assigned is irregular in shape
with inadequate means of ingress and egress; (e) the use of the Premises by the
Transferee (i) is not permitted by the use provisions in Section 6 hereof, or
(ii) violates any exclusive use granted by Landlord to another tenant in the
Building; (f) the Transfer would likely result in significant increase in the
use of the parking areas or Common Areas by the Transferee's employees or
visitors, and/or significantly increase the demand upon utilities and services
to be provided by Landlord to the Premises; (g) the Transferee does not have the
financial capability to fulfill the obligations imposed by the Transfer; or (h)
the Transferee is not in Landlord's reasonable opinion of reputable or good
character or consistent with Landlord's desired tenant mix. 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.

14.6    NO RELEASE. No Transfer shall release Tenant of Tenant's obligations
under this Lease or alter the primary liability of Tenant to pay the rent and to
perform all other obligations to be performed by Tenant hereunder. Landlord may
require that any Transferee remit directly to Landlord on a monthly basis, all
monies due Tenant by said Transferee. However, the acceptance of rent by
Landlord from any other person shall not be deemed to be a waiver by Landlord of
any provision hereof except to the extent of the rent so accepted. Consent by
Landlord to one Transfer shall not be deemed consent to any subsequent Transfer.
In the event of default by any Transferee of Tenant or any successor of Tenant
in the performance of any of the terms hereof, Landlord may proceed directly
against Tenant without the necessity of exhausting remedies against such
Transferee or successor. Landlord may consent to subsequent assignments of the
Lease or sublettings or amendments or modifications to the Lease with assignees
of Tenant, without notifying Tenant, or any successor of Tenant, and without
obtaining its or their consent thereto and any such actions shall not relieve
Tenant of liability under this Lease; provided, however, if Landlord amends this
Lease without the consent of Tenant and such amendment increases the obligations
of the Tenant hereunder, then Tenant will not be liable for that portion of the
obligations hereunder that were so increased.

14.7    ADMINISTRATIVE AND ATTORNEYS' FEES. If Tenant effects a Transfer or
requests the consent of Landlord to any Transfer, then Tenant shall, upon
demand, pay Landlord a non-refundable administrative fee, plus any reasonable
attorneys' and paralegal fees and costs incurred by Landlord in connection with
such Transfer or request for consent (whether attributable to Landlord's
in-house attorneys or paralegals or otherwise) in an aggregate amount not to
exceed One Thousand Dollars ($1,000.00) (in 1999 Dollars). Acceptance of the
administrative fee and/or reimbursement of Landlord's attorneys' and paralegal
fees shall in no event obligate Landlord to consent to any proposed Transfer.

14.8    MATERIAL INDUCEMENT. Tenant understands, acknowledges and agrees that
(a) Landlord's option to terminate this Lease and recapture the Premises from
Tenant in the case of a Special Sublease as provided in Section 14.3(b) above
rather than approve the proposed sublease, and (b) Landlord's right to receive
fifty percent (50%) of any excess consideration paid by a Transferee in
connection with an approved Transfer as provided in Section 14.4(d) above, are a
material inducement for Landlord's agreement to lease the Premises to Tenant
upon the terms and conditions herein set forth.

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 janitorial service and any other 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 nonresponsibility, and/or to alter, improve or
repair the Premises (in accordance with this Lease) or any other portion of the
Building or Project, all without being deemed guilty of or liable for any breach
of Landlord's covenant of quiet enjoyment or any eviction of Tenant, and without
abatement of rent. In exercising such entry rights, Landlord shall endeavor to
minimize, as reasonably practicable, the interference with Tenant's business,
and shall provide Tenant with reasonable advance written notice of such entry
(except in emergency situations and for scheduled services). For each of the
foregoing purposes, Landlord shall at all times have and retain a key with which
to unlock all of the doors in, upon and about the Premises, excluding Tenant's
vaults and safes, and Landlord shall have the means which Landlord may deem

                                      -17-
<PAGE>   25

proper to open said doors in an emergency in order to obtain entry to the
Premises. Any entry to the Premises obtained by Landlord by any of said means or
otherwise 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.

16.1    STANDARD UTILITIES AND SERVICES. Landlord shall provide the following
services on all days during the Lease Term, unless otherwise stated below.

(a)     Subject to all governmental rules, regulations and guidelines applicable
        thereto, Landlord shall provide heating, ventilation and air
        conditioning ("HVAC") when necessary for normal comfort for normal
        office use in the Premises, during the Business Hours of the Building,
        except for Building Holidays; provided, that notwithstanding the
        foregoing, Landlord may separately meter the Premises and charge Tenant
        based upon Tenant's consumption as provided under Section 16.2 below.

(b)     Landlord shall provide adequate electrical wiring and facilities and
        power for normal general office use as reasonably determined by
        Landlord. Landlord shall repair and replace standard lighting. Tenant
        shall bear the cost of replacement of lamps, starters and ballasts for
        non-standard Building lighting fixtures within the Premises.

(c)     Landlord shall provide city water from the regular Building outlets for
        drinking, locker room, lavatory and toilet purposes.

(d)     Landlord shall provide janitorial services five (5) days per week,
        except the dates of observation of the Building Holidays, in and about
        the Premises.

(e)     Landlord shall provide nonexclusive automatic elevator service at all
        times.

16.2    OVERSTANDARD TENANT USE; SEPARATE METER. Tenant shall not, without
Landlord's prior written consent, use heat-generating machines, machines other
than normal fractional horsepower office machines, or equipment or lighting
other than building standard lights in the Premises, which may adversely affect
the temperature otherwise maintained by the air conditioning system or increase
the water normally furnished for the Premises by Landlord pursuant to the terms
of Section 16.1 of this Lease. At Landlord's election, Landlord may separately
meter the Premises for utilities, including without limitation, HVAC, water, gas
and electricity, and Tenant shall pay, at Landlord's election, either directly
to the provider thereof or to Landlord, within ten (10) days after billing, the
cost of Tenant's consumption. To the extent the Premises are not separately
metered or if Landlord's cooperation is necessary in connection therewith, if
Tenant desires to use HVAC during hours other than the Business Hours, (i)
Tenant shall give Landlord such prior notice, as Landlord shall from time to
time establish as appropriate, of Tenant's desired use, (ii) Landlord shall
supply such after-hours HVAC to Tenant at such hourly cost (which shall be
Landlord's actual cost of the use of such HVAC and administrative and overhead
charges (not to exceed five percent (5%) of the actual cost of the service
rendered or delivered), and the cost of maintenance and increased wear and tear
on equipment used to provide such after hours HVAC to Tenant as Landlord shall
from time to time reasonably establish in order to reimburse Landlord for such
costs, and (iii) Tenant shall pay such cost within ten (10) days after billing.

16.3    ADDITIONAL SERVICES. Landlord shall also have the exclusive right, but
not the obligation, to provide any additional services which may be required by
Tenant, including, without limitation, locksmithing, additional janitorial
service, and additional repairs and maintenance, provided that Tenant shall pay
to Landlord, within ten (10) days after billing, the sum of all costs to
Landlord of such additional services plus an administration fee in an amount not
to exceed ten (10%) of such costs, Charges for any utilities or service for
which Tenant is required to pay from time to time hereunder, shall be deemed
additional rent hereunder and shall be billed on a monthly basis.

16.4    INTERRUPTION OF USE. Landlord's failure to furnish any of the utilities
and services described in Section 16.1 above when such failure is caused by all
or any of the following shall not result in any liability of Landlord: (a)
accident, breakage or repairs; (b) strikes, lockouts or other labor disturbances
or labor disputes of any such character; (c) governmental regulation, moratorium
or other governmental action; (d) inability, despite the exercise of reasonable
diligence, to obtain electricity, water or fuel; or (e) any other cause beyond
Landlord's reasonable control. In addition, in the event of the failure of any
said utilities or services, Tenant shall not be entitled to any abatement or
reduction of rent (except as expressly provided below and in Sections 18.3 and
19.2 if such failure is a result of a damage or taking described therein), no
eviction of Tenant shall result, and Tenant shall not be relieved from the
performance of any covenant or agreement in this Lease. In the event of any
stoppage or interruption of services or utilities, Landlord shall diligently
attempt to resume such services or utilities as promptly as practicable.
Notwithstanding the foregoing, in the event (an "ABATEMENT EVENT") that Tenant
cannot reasonably use, and does not use, the Premises or any portion thereof, as
a result of (a) any failure by Landlord to supply any of the Building's
sanitary, heating, air conditioning, water, elevator, life safety or other
essential systems serving

                                      -18-
<PAGE>   26
the Premises (collectively, the "ESSENTIAL SERVICES"), or (b) any failure by
Landlord to make repairs or perform any maintenance under Section 11.2 of this
Lease, then Tenant shall give Landlord notice of such Abatement Event, and if
such Abatement Event continues for (a) with respect to an Abatement Event over
which Landlord does not have reasonable control, forty-five (45) consecutive
calendar days, and (b) with respect to an Abatement Event over which Landlord
has reasonable control, five (5) consecutive business days, after Landlord's
receipt of any such notice (the "ELIGIBILITY PERIOD"), then the Monthly Basic
Rent and Tenant's Percentage of Direct Expenses and (to the extent not
separately metered to the Premises) Utilities Costs shall be abated or reduced,
as the case may be, after the expiration of the Eligibility Period for such time
that Tenant continues to be so prevented from using, and does not use, the
Premises or a portion thereof, in the proportion that the rentable area of the
portion of the Premises that Tenant cannot reasonably use, and does not use,
bears to the total rentable area of the Premises; provided, however, in the
event that Tenant is prevented from using, and does not use, a portion of the
Premises for a period of time in excess of the Eligibility Period and the
remaining portion of the Premises is not sufficient to allow Tenant to
effectively conduct its business therein, and if Tenant does not conduct its
business from such remaining portion, then for such time after expiration of the
Eligibility Period during which Tenant is so prevented from effectively
conducting its business therein, the Monthly Basic Rent and Tenant's Percentage
of Direct Expenses and (to the extent not separately metered to the Premises)
Utilities Costs shall be abated for such time as Tenant continues to be so
prevented from using, and does not use, the Premises. If, however, Tenant
reoccupies any portion of the Premises during such period, the Monthly Basic
Rent and Tenant's Percentage of Direct Expenses and (to the extent not
separately metered to the Premises) Utilities Costs allocable to such reoccupied
portion, based on the proportion that the rentable area of such reoccupied
portion of the Premises bears to the total rentable area of the Premises, shall
be payable by Tenant from the date Tenant reoccupies such portion of the
Premises. Such right to abate Monthly Basic Rent and Tenant's Percentage of
Direct Expenses and (to the extent not separately metered to the Premises)
Utilities Costs shall be Tenant's sole and exclusive remedy at law or in equity
for an Abatement Event. Landlord shall use commercially reasonable efforts to
restore any Essential Services or make any repairs or perform any maintenance
that is the subject of any Abatement Event. Notwithstanding anything to the
contrary contained in this Lease, but subject to the provisions of Section 18
which shall apply in the event of damage or destruction, upon the occurrence of
an Abatement Event and the continuation thereof in a manner that would prevent
Tenant's operation of its business in the Premises for a period of time greater
than ninety (90) days after the date Landlord receives notice of such Abatement
Event, then Tenant may elect to terminate this Lease upon written notice to
Landlord. Except as provided in this Section 16.3, nothing contained herein
shall be interpreted to mean that Tenant is excused from paying rent due
hereunder.

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, nor for (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. Unless caused by the intentionally tortious conduct of Landlord, Landlord
shall not be liable to Tenant for any consequential damages or for loss of
revenue or income and Tenant waives any and all claims for any such damages.
Notwithstanding anything to the contrary contained in this Section 17.1, all
property of Tenant, its agents, employees and invitees kept or stored on the
Premises, whether leased or owned by any such parties, 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 Landlord and Landlord's partners,
officers, directors, employees, agents, successors and assigns (collectively,
"LANDLORD INDEMNIFIED PARTIES") harmless from and against, any and all claims,
damages, judgments, suits, causes of action, losses, liabilities and expenses,
including attorneys' fees and court costs (collectively, "INDEMNIFIED CLAIMS"),
arising or resulting from (a) any occurrence at the Premises following the date
Landlord delivers all or any portion 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 agents,
employees, contractors, subtenants, assignees, licensees or, with respect to
acts or omissions within the Premises only, Tenant's invitees (collectively,
"TENANT PARTIES"); (c) the use of the Premises and Common Areas and conduct of
Tenant's business by Tenant or any Tenant Parties, or any other activity, work
or thing done, permitted or suffered by Tenant or any Tenant Parties, in or
about the Premises, the Building or elsewhere in 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. 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.

                                      -19-
<PAGE>   27

17.3    SURVIVAL; NO RELEASE OF INSURERS. Tenant's indemnification obligations
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 or any part
of the Building is damaged by fire or other casualty, and Landlord's contractor
estimates in a writing delivered to the parties that the damage thereto is such
that the Building and/or 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 commencement of repair, reconstruction or
restoration, 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 or
any other part of the Building is damaged and 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 Building and Premises
        damaged by such casualty (including the Tenant Improvements and, to the
        extent of insurance proceeds received from Tenant, Tenant Changes), 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 (excluding proceeds for Tenant's furniture, fixtures and equipment
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(c) 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 and provided Landlord restores the
Premises, 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 or the Building,
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 area of the
portion of the Premises that Tenant is prevented from using, and does not use,
bears to the total rentable area 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 Parties, there shall be no abatement of rent if the rental
interruption insurance carried by Landlord is not payable by reason of such
conduct. 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.

18.4    INABILITY TO COMPLETE. Notwithstanding anything to the contrary
contained in this Section 18, in the event Landlord is obligated or elects to
repair, reconstruct and/or restore the damaged portion of the Building or
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, delays due to Force Majeure events
as defined in Section 32.15, and delays caused by Tenant or any Tenant Parties,
but not including financial inability), then Landlord may elect to terminate
this Lease upon thirty (30) days' prior written notice to Tenant.

                                      -20-
<PAGE>   28
18.5    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; however, if at the time of such election to terminate Tenant has the
right to exercise an Extension Option, then Tenant may rescind Landlord's
election to terminate by exercising the Extension Option within the earlier to
occur of ten (10) days following Landlord's election to terminate or the last
date that Tenant otherwise has to exercise the Extension Option.

18.6    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, 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.

19.3    CONDEMNATION AWARD. Subject to the provisions of Section 19.4 below, in
connection with any taking of the Premises or 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 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 and for the value of Tenant's interest in any above Building standard
Tenant Improvements or Tenant Changes that were paid for by Tenant (and not from
the Tenant Improvement Allowance).

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,
the date Tenant takes possession of the Premises, or the date Tenant commences
or causes to be commenced any work of any type in or on the Premises pursuant to
this Lease, and continuing during the entire Term, Tenant shall obtain and keep
in full force and effect, the following insurance:

(a)     Special Form (formerly known as All Risk) insurance, including fire and
        extended coverage, sprinkler leakage, vandalism and malicious mischief
        coverage upon property of every description and kind owned by Tenant and
        located in the Premises or Building, or for which Tenant is legally

                                      -21-
<PAGE>   29
        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 initial Tenant Improvements
        previously existing or installed in the Premises), 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
        an initial combined single limit of liability of not less than Three
        Million Dollars ($3,000,000.00). The limits of liability of such
        commercial general liability insurance shall be increased every five (5)
        years during the Term of this Lease to an amount reasonably required by
        Landlord.

(c)     Worker's compensation and employers liability insurance, in statutory
        amounts and limits.

(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 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 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) shall 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 Landlord and any other additional insureds shall
be primary, and any insurance carried by Landlord or any other 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 any other additional insureds)
in writing not less than thirty (30) days prior to any material change,
reduction in coverage, cancellation or other termination thereof; and (h)
contain a cross liability or severability of interest endorsement. 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, certified copies of each such
insurance policy (or certificates from the insurance company evidencing the
existence of such insurance and Tenants compliance with the foregoing provisions
of this Section 20). Tenant shall cause replacement policies or 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 policies or
certificates are not furnished within the time(s) specified herein and such
failure continues for more than ten (10) days following written notice thereof
to Tenant, then 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.

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 Project
Common Areas, the Building, the Premises and the Tenant Improvements initially
installed in the Premises pursuant to Exhibit

                                      -22-
<PAGE>   30

"C" (excluding, however, Tenant's furniture, equipment and other personal
property and any Tenant Changes) 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 similar
financial strength as Landlord) 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, and provided Landlord
has a net worth of at least Seventy-Five Million Dollars ($75,000,000.00) with
net current assets of at least Twenty-Five Million Dollars ($25,000,000.00),
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 [determined
based upon the prevailing market rates for similar coverage from insurance
companies satisfying the requirements of Section 20.2] and deductibles) shall be
included in Insurance Costs, except that any increase in the premium for the
property insurance attributable to the replacement cost of the Tenant
Improvements in excess of Building standard shall not be included as Insurance
Costs, but shall be paid by Tenant concurrently with Tenant's monthly
installment of its share of Insurance Costs.

22.     WAIVER OF CLAIMS; WAIVER OF SUBROGATION.

22.1    MUTUAL WAIVER OF PARTIES. 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) any occurrence insured against under any insurance
policy (other than the 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) any occurrence which
would have been covered under any insurance (other than the 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.

22.2    WAIVER OF INSURERS. Each party shall cause each insurance policy (other
than the 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 thirty (30) days or longer while in default of any
        other provision of this Lease;

(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, when such
        failure continues for five (5) business days after written notice
        thereof from Landlord that such payment was not received when due;

(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 thirty (30)
        days after written notice thereof from Landlord to Tenant; provided,
        however, that if the nature of Tenant's default is such that more than
        thirty (30) days are reasonably required for its cure, then Tenant shall
        not be deemed to be in default if Tenant shall commence such cure within
        said thirty (30) day period and thereafter diligently prosecute such
        cure to completion; and

(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 the 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 a guarantors assets, where possession is not
        restored to Tenant or the 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 Tenant's interest in this
        Lease or of substantially all of a guarantor's assets where such seizure
        is not discharged within sixty (60) days.

                                      -23-
<PAGE>   31

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; 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.

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
Monthly Basic Rent) or perform any other act on its part to be paid or performed
hereunder and such failure shall continue for five (5) business days with
respect to monetary obligations (or thirty (30) days with respect to
non-monetary obligations, or such shorter period of time as appropriate in the
event of an emergency) 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) business days after demand therefor as additional rent.

23.6    INTEREST. If any monthly installment of Rent or Project 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.

                                      -24-
<PAGE>   32

23.7    LATE CHARGES. Tenant acknowledges that, in addition to interest costs,
the late payments by Tenant to Landlord of any Monthly Basic 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 monthly installment
of Monthly Basic Rent or Direct Expenses 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 five percent (5%) of the overdue amount as a
late charge, but in no event more than the maximum late charge allowed by law;
provided, however, the late charge shall not be payable with respect to the
first late payment in any consecutive twelve (12) month period. 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    [INTENTIONALLY OMITTED].

23.9    RIGHTS AND REMEDIES CUMULATIVE. All rights, options and remedies of
Landlord contained in this Section 23 and elsewhere in this Lease (including
Section 28 below) 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.

24.     LANDLORD'S DEFAULT. Subject to the provisions of Section 16.3, 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 (or such shorter
period of time as may be reasonable in the event of an emergency); provided
however, that if the nature of Landlord's obligation is such that more than
thirty (30) days (or such shorter period, as applicable) are required for its
performance, then Landlord shall not be deemed in default if it commences such
performance within such thirty (30) day period (or such shorter period, as
applicable) and thereafter diligently pursues the same to completion. Upon any
such uncured default by Landlord, Tenant may exercise any of its rights provided
at law or in 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.

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
Site, or any lessor of any ground or master lease now or hereafter affecting all
or any portion of the Building or Site, 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
and any mortgagee and/or ground lessor of Landlord, as applicable, 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, any
commercially reasonable 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 and such failure continues for more than five (5) business days
following written notice thereof to Tenant, Tenant shall be in default hereunder
without the benefit of any additional notice or cure periods specified in
Section 23.1 above.

                                      -25-
<PAGE>   33

26.     ESTOPPEL CERTIFICATE.

26.1    OBLIGATIONS. Within ten (10) business days following a party's written
request, the other party shall execute and deliver to the requesting party an
estoppel certificate, in a form substantially similar to the form of Exhibit "F"
attached hereto (modified as appropriate in the event Landlord is the party
giving the estoppel certificate), 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 such party'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 the requesting party. 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
Site, as well as their assignees.

26.2    TENANT'S FAILURE TO DELIVER. If Tenant fails to deliver such estoppel
certificate within such time, and such failure continues for more than five (5)
business days following written notice thereof to Tenant, then such failure
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.

27.     [INTENTIONALLY OMITTED].

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 Site, 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 a 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 have the right to use and occupy 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 Site. In the event of any transfer or conveyance of any such title or
interest (other than a transfer for security purposes only), and upon the
assumption by the transferee of Landlord's obligations under this Lease accruing
after the date of such transfer or conveyance, the transferor shall be
automatically relieved of all covenants and obligations on the part of Landlord
contained in this Lease accruing after the date of such transfer or conveyance.
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
Site, 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,
members or shareholders of Landlord or Landlord's members or partners, and
Tenant shall not seek recourse against the individual partners, directors,
officers, members or shareholders of Landlord or against Landlord's members or
partners or any other persons or entities having any interest in Landlord, 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 Building

                                      -26-
<PAGE>   34

(including any proceeds from a sale of the Building, insurance and condemnation
proceeds with respect to the Building and any rentals received from the
Building), and no other assets of Landlord.

32.     MISCELLANEOUS.

32.1    GOVERNING LAW. This Lease shall be governed by, and construed pursuant
to, the laws of the state in which the Building is 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
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, court
costs and costs of appeal), 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.

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 (and the Exhibits and Riders
attached hereto) contain 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 Monthly Basic Rent and Direct
Expenses and Utilities Costs) 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.

32.10   RECORDING. Neither Landlord nor Tenant shall record this Lease. In
addition, neither party shall record a short form memorandum of this Lease
without the prior written consent (and signature on the memorandum) of the
other, and provided that prior to recordation Tenant executes and delivers to
Landlord, in recordable form, a properly acknowledged quitclaim deed or other
instrument extinguishing

                                      -27-
<PAGE>   35

all of the Tenant's rights and interest in and to the Site, Building and
Premises, and designating Landlord as the transferee, which deed or other
instrument shall be held by Landlord and may be recorded by Landlord once the
Lease terminates or expires (but not prior thereto). If such short form
memorandum is recorded in accordance with the foregoing, the party requesting
the recording shall pay for all costs of or related to such recording,
including, but not limited to, recording charges and documentary transfer taxes.

32.11   EXHIBITS AND RIDERS. All Exhibits and Riders attached to this Lease are
hereby incorporated in this Lease as though set forth at length herein.

32.12   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.

32.13   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 one (1) time in any calendar year, except in the event of a sale or
refinancing of the Building), Tenant shall deliver to Landlord (a) a current
financial statement of Tenant and any guarantor of this Lease, and (b) financial
statements of Tenant and such guarantor for the two (2) years prior to the
current financial statement year. 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, member/manager or general partner of Tenant (if Tenant is a
corporation, limited liability company or partnership, respectively).

32.14   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.
The provisions of this Lease relating to Percentage Rent payable hereunder, if
any, are included solely for the purpose of providing a method whereby rent is
to be measured and ascertained.

32.15   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 32.15 shall not apply to
nor operate to excuse Tenant from the payment of Monthly Basic Rent, Project
Operating Expenses, additional rent or any other payments strictly in accordance
with the terms of this Lease.

32.16   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.

32.17   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 (excepting Tenant's
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.

32.18   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.

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

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,

                                      -28-
<PAGE>   36

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    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.     RIGHT OF FIRST REFUSAL. Landlord hereby grants to the Original Tenant
(and any Transferee under a Permitted Transfer), during the initial Term, a
right of first refusal with respect to all space located on the third (3rd)
floor of the Building (the "FIRST REFUSAL SPACE"). Notwithstanding the foregoing
(i) for First Refusal Space which is subject to a lease as of the date of this
Lease, such first refusal right of Tenant shall commence only following the
expiration or earlier termination of such existing lease (such existing leases
may be collectively referred to herein as the "SUPERIOR LEASES"), including any
renewal of such Superior Leases, whether or not such renewal is pursuant to an
express written provision in such lease, and regardless of whether any such
renewal is consummated pursuant to a lease amendment or a new lease, and (ii)
such first refusal right shall be subordinate and secondary to all rights of
expansion, first refusal, first offer or similar rights granted to the tenant(s)
of the Superior Leases or any other leases existing as of the date of this Lease
(the rights described in items (i) and (ii) above to be known collectively, for
purposes of this Section 34 only, as "SUPERIOR RIGHTS"). Tenant's right of first
refusal shall be on the terms and conditions set forth in this Section 34.

(a)     Procedure. Landlord shall notify Tenant (the "FIRST REFUSAL NOTICE")
        from time to time when Landlord receives a proposal that Landlord
        desires to accept for all or any portion of the First Refusal Space,
        where no holder of a Superior Right desires to lease such space. The
        First Refusal Notice shall describe the space which is the subject of
        the proposal, shall set forth the terms and conditions (including the
        proposed lease term) set forth in the proposal (collectively, the
        "TERMS") and shall include a copy of the proposal. Notwithstanding the
        foregoing, Landlord's obligation to deliver the First Refusal Notice
        shall not apply during the last nine (9) months of the initial Term
        unless Tenant has exercised the first Extension Option.

(b)     Procedure for Acceptance. If Tenant wishes to exercise Tenant's rights
        of first refusal with respect to the space described in the First
        Refusal Notice, then within three (3) business days after delivery of
        the First Refusal Notice to Tenant (the "ELECTION DATE"), Tenant shall
        deliver written notice to Landlord ("TENANT'S ELECTION NOTICE") pursuant
        to which Tenant shall elect either to (i) lease the entire First Refusal
        Space described in the First Refusal Notice upon the Terms set forth in
        the First Refusal Notice; (ii) refuse to lease such First Refusal Space
        identified in the First Refusal Notice, specifying that such refusal is
        not based upon the Terms set forth by Landlord in the First Refusal
        Notice, but upon Tenant's lack of need for such First Refusal Space, in
        which event Landlord may lease such First Refusal Space to any person or
        entity on any terms Landlord desires and Tenant's right of first refusal
        with respect to the First Refusal Space specified in Landlord's First
        Refusal Notice shall thereupon terminate and be of no further force or
        effect; or (iii) refuse to lease the First Refusal Space, specifying
        that such refusal is based upon the Terms set forth in the First Refusal
        Notice, in which event Tenant shall also specify in Tenant's Election
        Notice revised Terms upon which Tenant would be willing to lease such
        First Refusal Space from Landlord ("TENANT'S PROPOSED TERMS"). If Tenant
        does not so respond in writing to Landlord's First Refusal Notice by the
        Election Date, Tenant shall be deemed to have elected the option
        described in clause (ii) above. If Tenant timely delivers to Landlord
        Tenant's Election Notice pursuant to clause (iii) above, Landlord may
        elect either to: (a) lease such First Refusal Space to Tenant upon
        Tenant's Proposed Terms; or (b) lease the First Refusal Space to any
        person or entity upon any terms Landlord desires and Tenant's right of
        first refusal with respect to the First Refusal Space specified in
        Landlord's First Refusal Notice shall thereupon terminate and be of no
        further force or effect; provided, however if Landlord intends to lease
        the First Refusal Space upon terms equal to or more favorable to such
        third party than Tenant's Proposed Terms, then Tenant's Right of First
        Refusal will not terminate and the provisions of this Section 34 shall
        apply again to such proposed leasing.

(c)     Lease of First Refusal Space. If Tenant timely exercises Tenants right
        to lease the First Refusal Space as set forth herein, Landlord and
        Tenant shall execute at Landlord's sole election, (i) an

                                      -29-
<PAGE>   37

        amendment to this Lease incorporating into this Lease the Terms
        applicable to such First Refusal Space, or (ii) a new lease
        incorporating the terms applicable to such First Refusal Space.

(d)     Termination of Right of First Refusal. The rights set forth in this
        Section 34, and Landlord's obligations with respect thereto, shall be
        personal to the Original Tenant and any Transferee under a Permitted
        Transfer. The right of first refusal granted herein shall terminate as
        to a particular First Refusal Space upon the failure by Tenant to
        exercise its right of first refusal with respect to such First Refusal
        Space as offered by Landlord but shall remain in effect for any
        subsequent availability of all or any portion of the remaining First
        Refusal Space. Tenant shall not have the right to lease the First
        Refusal Space if, as of the date of the attempted exercise of any right
        of first refusal by Tenant, or, at Landlord's option, as of the
        scheduled date of delivery of such First Refusal Space to Tenant, Tenant
        is in default under this Lease after any applicable notice and cure
        periods.

35.     TEMPORARY SPACE. Landlord agrees to permit Tenant to occupy 13,432
rentable square feet of vacant space known as Suite 100 located on the ground
floor of the Building located at 10180 Telesis Court within the Project (the
"TEMPORARY SPACE") during the period between the full execution and delivery of
this Lease and five (5) business days following the Commencement Date hereunder
(the "TEMPORARY SPACE TERM"). Tenant will accept the Temporary Space in its
"then as-is" condition, and Landlord will have no obligation to improve the
Temporary Space. Tenant shall have no obligation to pay any rental for the
Temporary Space, but Tenant shall be obligated to pay for all utilities that may
be provided to the Temporary Space (the allocation of the cost for such
utilities will be made in the same manner as the allocation of utilities for the
Premises). Except as provided above, Tenant's occupancy of the Temporary Space
shall be subject to all of the terms and conditions of this Lease that could
logically be construed as applying thereto as if the Temporary Space were the
Premises, including, without limitation, Sections 17, 20 and 22. Landlord will
have the right to show the Temporary Space to potential Tenants at any time
during the Temporary Space Term. If Tenant fails to surrender possession of the
Temporary Space with five (5) business days following the Commencement Date,
then the provisions of Section 9 of this Lease shall apply to such failure and
holdover, except that Monthly Basic Rent for the Temporary Space shall be at the
rate of One and 80/100 Dollars ($1.80) per rentable square foot of the Temporary
Space per month.

36.     OPTION TERM.

(a)     OPTION RIGHT. Landlord hereby grants to Tenant two (2) options (each an
        "EXTENSION OPTION") to extend the Term for a period of five (5) years
        each (each, an "OPTION TERM"), each of which shall be exercised only by
        written notice delivered by Tenant to Landlord as provided below,
        provided that, as of the date of delivery of such notice, Tenant is not
        in default under this Lease beyond any applicable notice and cure
        periods. Upon the proper exercise of an option to extend, and provided
        that (at Landlord's option), as of the end of the initial Term or first
        Option Term, as applicable, Tenant is not in default under this Lease
        beyond any applicable notice and cure periods, the Term as it applies to
        the Premises, shall be extended for the applicable Option Term and all
        references to the Term shall include the exercised Option Term. The
        rights contained in this Section 36 shall be personal to the Original
        Tenant and/or any Transferee under a Permitted Transfer and may only be
        exercised by the Original Tenant and/or such Transferee if, at the time
        of the attempted exercise of the Option, the Original Tenant or such
        Transferee is in physical occupancy and possession of the entire
        Premises.

(b)     OPTION RENT. The Monthly Basic Rent payable by Tenant during an Option
        Term shall be the "Fair Market Rental Rate" for the Premises. The term
        "FAIR MARKET RENTAL RATE" for the Premises during an Option Term shall
        mean the amount per rentable square foot that a comparable, willing,
        non-equity, non-sublease tenant would pay and a comparable, willing
        landlord would accept on a non-sublease, non-renewal basis, at arm's
        length, for unencumbered space comparable to the Premises located in the
        Project and in other comparable Class "A" office buildings in the
        Sorrento Mesa area.

(c)     EXERCISE OF OPTION. An Extension Option shall be exercised by Tenant, if
        at all, and only in the following manner: (i) Tenant shall deliver
        written notice to Landlord not less than nine (9) months prior to the
        expiration of the initial Term or first Option Term, as applicable
        exercising its option; (ii) Landlord, after receipt of Tenant's notice,
        shall deliver notice (the "Option Rent Notice") to Tenant not less than
        eight (8) months prior to the expiration of the initial Term or first
        Option Term, as applicable, setting forth Landlord's determination of
        the Fair Market Rental Rate; and (iii) if Tenant objects to Landlord's
        determination of the Fair Market Rental Rate contained in the Option
        Rent Notice, Tenant shall deliver written notice of such objection
        within twenty (20) days after delivery of the Option Rent Notice and the
        parties shall follow the procedure, and the Fair Market Rental Rate
        shall be determined, as set forth in Section 36(d) below.

(d)     DETERMINATION OF FAIR MARKET RENTAL RATE. In the event Tenant timely and
        appropriately objects in writing to the Fair Market Rental Rate
        initially determined by Landlord with respect to the Option Term,
        Landlord and Tenant shall attempt to agree upon the Fair Market Rental
        Rate, using their best good-faith efforts. If Landlord and Tenant fail
        to reach agreement within sixty (60) days following Tenant's delivery to
        Landlord of Tenants objection to the Fair Market Rental Rate (the
        "OUTSIDE AGREEMENT DATE"), then each party shall submit to the other
        party a separate written determination of the Fair Market Rental Rate
        within ten (10) business days after the Outside Agreement Date, and

                                      -30-
<PAGE>   38

        such determinations shall be submitted to arbitration in accordance with
        the provisions set forth below. Failure of Tenant or Landlord to submit
        a written determination of the Fair Market Rental Rate within such ten
        (10) business day period shall conclusively be deemed to be the
        non-determining party's approval of the Fair Market Rental Rate
        submitted within such ten (10) business day period by the other party.

        (i)     Landlord and Tenant shall each appoint one arbitrator who shall
                be by profession an independent real estate broker who shall
                have been active over the five (5) year period ending on the
                date of such appointment in the leasing of Class "A" office
                buildings in the Sorrento Mesa area ("COMPARABLE BUILDINGS").
                The determination of the arbitrators shall be limited solely to
                the issue of whether Landlord's or Tenant's submitted Fair
                Market Rental Rate is the closest to the actual Fair Market
                Rental Rate as determined by the arbitrators, taking into
                account the requirements of Section 36(b) of this Lease. Each
                such arbitrator shall be appointed within thirty (30) days after
                the Outside Agreement Date.

        (ii)    The two (2) arbitrators so appointed shall within ten (10) days
                of the date of the appointment of the last appointed arbitrator
                agree upon and appoint a third arbitrator who shall be qualified
                under the same criteria set forth hereinabove for qualification
                of the initial two (2) arbitrators.

        (iii)   The three (3) arbitrators shall within thirty (30) days after
                the appointment of the third arbitrator reach a decision as to
                whether the parties shall use Landlord's or Tenant's submitted
                Fair Market Rental Rate and shall notify Landlord and Tenant
                thereof.

        (iv)    The decision of the majority of the three (3) arbitrators shall
                be binding upon Landlord and Tenant.

        (v)     If either Landlord or Tenant fails to appoint an arbitrator
                within thirty (30) days after the applicable Outside Agreement
                Date, the arbitrator appointed by one of them shall reach a
                decision, notify Landlord and Tenant thereof, and such
                arbitrator's decision shall be binding upon Landlord and Tenant.

        (vi)    If the two (2) arbitrators fail to agree upon and appoint a
                third arbitrator within the time period provided in clause (ii)
                above, then the parties shall mutually select the third
                arbitrator. If Landlord and Tenant are unable to agree upon the
                third arbitrator within ten (10) days, then either party may,
                upon at least five (5) days' prior written notice to the other
                party, request the Presiding Judge of the San Diego County
                Superior Court, acting in his private and nonjudicial capacity,
                to appoint the third arbitrator. Following the appointment of
                the third arbitrator, the panel of arbitrators shall within
                thirty (30) days thereafter reach a decision as to whether
                Landlord's or Tenant's submitted Fair Market Rental Rate shall
                be used and shall notify Landlord and Tenant hereof.

        (vii)   The cost of the arbitrators and the arbitration proceeding shall
                be paid by Landlord and Tenant equally, except that each party
                shall pay for the cost of its own witnesses and attorneys.

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

TENANT:                                     LANDLORD:

WebSideStory, Inc.,                         LNR Seaview, Inc.
a California corporation                    a California

By: /s/ MICHAEL CHRISTIAN                   By: /s/ DAVID O. TEAM
   ------------------------------              -----------------------------
   Print Name: MICHAEL CHRISTIAN               Print Name: DAVID O. TEAM
   Print Title: CHIEF OPERATING OFFICER        Print Title: VICE PRESIDENT

*By: /s/ MICHAEL D. REYNOLDS               By: /s/ CURTIS J. STEPHENSON
    -----------------------------              -----------------------------
    Print Name: MICHAEL D. REYNOLDS            Print Name: CURTIS J. STEPHENSON
    Print Title: CHIEF FINANCIAL OFFICER       Print Title:

NOTE:

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

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

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

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

                                      -31-
<PAGE>   39

                                  EXHIBIT "A"

                                   SITE PLAN

                            SEAVIEW CORPORATE CENTER

                                   Site Plan

                                  [SITE PLAN]

                                  EXHIBIT "A"

                                      -32-
<PAGE>   40

                                   EXHIBIT "B"
                                   FLOOR PLAN
                                 [SEE ATTACHED]

                                   EXHIBIT "B"

<PAGE>   41

                                  [FLOOR PLAN]

            SUMMARY
           ------------------------
            WORKSTATIONS        46
            OFFICES             16
           ------------------------
            TOTAL               62

  SEAVIEW
  SIXTH FLOOR PLAN

                                  PAGE 1 OF 3

<PAGE>   42

                                  [FLOOR PLAN]

                  SUMMARY
                 ------------------------
                  WORKSTATIONS        91
                  OFFICES             19
                 ------------------------
                  TOTAL TOTAL         110

                  SEAVIEW

                  FIFTH FLOOR PLAN
                  8/13/99

                                  PAGE 2 OF 3

<PAGE>   43

                                  [FLOOR PLAN]

                               FOURTH FLOOR PLATE

                                  PAGE 3 OF 3
<PAGE>   44

                                   EXHIBIT "C"

                              WORK LETTER AGREEMENT

THIS WORK LETTER AGREEMENT ("Work Letter Agreement") shall set forth the terms
and conditions relating to the construction of improvements for the Premises.
All references in this Work Letter Agreement to "the Lease" shall mean the
relevant portions of the Lease to which this Work Letter Agreement is attached
as Exhibit "C".

                                    SECTION I

                      GENERAL CONSTRUCTION OF THE PREMISES

Landlord will construct, at its sole cost and expense, the base, shell, and core
(i) of the Premises and (ii) of the floors of the Building on which the Premises
are located (collectively, the "BASE, SHELL, AND CORE") in compliance with all
applicable laws. In addition, Landlord will construct, at its sole cost and
expense, those items described on Schedule I attached hereto in compliance with
all applicable laws, which items shall be considered as part of the Base, Shell
and Core. Tenant shall, at its sole cost and expense (but subject to
reimbursement pursuant to Section 2 below), install in the Premises certain
"Tenant Improvements" (as defined below) pursuant to the provisions of this Work
Letter Agreement. Except for the work described in this Work Letter Agreement to
be performed by Landlord, Landlord shall not be obligated to make any other
alterations or improvements to the Premises or the Building.

                                    SECTION 2

                               TENANT IMPROVEMENTS

2.1     TENANT IMPROVEMENT ALLOWANCE. Tenant shall be entitled to a one-time
tenant improvement allowance (the "TENANT IMPROVEMENT ALLOWANCE") in the amount
of up to, but not exceeding, Thirty-Five and No/100 Dollars ($35.00) per usable
square foot of the Premises, for the costs relating to the initial design and
construction, using Building standard finishes, quantities and materials (unless
otherwise reasonably approved by Landlord), of Tenant's improvements which are
permanently affixed to the Premises (the "TENANT IMPROVEMENTS"), excluding (i)
phone and data cabling, (ii) the back-up generator and (iii) the uninterrupted
power supply system. For purposes of calculating the Tenant Improvement
Allowance, the usable square footage of the Premises shall be 36,694, which
excludes the restrooms, electrical rooms, tele/com equipment rooms (but not
Tenant's network operating center) and the curtain walls in the Premises. In no
event shall Landlord be obligated to make disbursements pursuant to this Work
Letter Agreement in a total amount which exceeds the Tenant Improvement
Allowance. Tenant shall not be entitled to receive any cash payment or credit
against rent or otherwise for any portion of the Tenant Improvement Allowance
which is not used to pay for the Tenant Improvement Allowance Items (as such
term is defined below).

2.2     TENANT IMPROVEMENT ALLOWANCE ITEMS. Except as otherwise set forth in
this Work Letter Agreement, the Tenant Improvement Allowance shall be disbursed
by Landlord (each of which disbursement shall be made pursuant to the
disbursement process described in Sections 2.3, 2.4 and 2.5 below), only for the
following items and costs (collectively, the "TENANT IMPROVEMENT ALLOWANCE
ITEMS"):

        2.2.1   Payment of the fees of the "Architect" and the "Engineers," as
those terms are defined in Section 3.1 of this Work Letter Agreement, and
payment of the fees incurred by, and the cost of documents and materials
supplied by, Landlord and Landlord's consultants in connection with the
preparation and review of the "Construction Drawings," as that term is defined
in Section 3.1 of this Work Letter Agreement;

        2.2.2   The payment of plan check, permit and license fees relating to
construction of the Tenant Improvements;

        2.2.3   The cost of construction of the Tenant Improvements, including,
without limitation, contractors fees and general conditions, testing and
inspection costs, trash removal and hoists;

        2.2.4   The cost of any changes in the Base, Shell and Core when such
changes are required by the Construction Drawings (including if such changes are
due to the fact that such work is prepared on an unoccupied basis), such cost to
include all direct architectural and/or engineering fees and expenses incurred
in connection therewith;

        2.2.5   The cost of any changes to the Construction Drawings and/or
Tenant Improvements required by applicable laws and building codes
(collectively, "CODE");

        2.2.6   Sales and use taxes and Title 24 fees; and

                                   EXHIBIT "C"
<PAGE>   45

        2.2.7   All other actual, reasonable out-of-pocket costs expended by
Tenant in connection with the construction of the Tenant Improvements, including
any payment and performance bonds required by Landlord and the fees for Tenant's
construction manager (such fees not to exceed 50 cents per usable square foot of
the Premises).

If any portion of the Tenant Improvement Allowance remains after payment in full
for the above-referenced Tenant Improvement Allowance Items, Landlord shall
retain such portion of the Tenant Improvement Allowance and Tenant shall have no
claim or interest therein.

2.3     PERIODIC DISBURSEMENTS OF TENANT IMPROVEMENT ALLOWANCE. Provided Tenant
is not in default under the Lease (and no circumstance exists that would, with
notice or lapse of time, or both, constitute a default under the Lease),
Landlord shall make periodic disbursements (but no more often than monthly) of
the Tenant Improvement Allowance for Tenant Improvement Allowance Items.
Landlord may, at its election, make disbursement checks payable jointly to
Tenant and the Contractor. As to each disbursement, the appropriate portion of
the Tenant Improvement Allowance (as calculated pursuant to Section 2.5 below)
shall be disbursed to Tenant only when Landlord has received the following
("EVIDENCE OF COMPLETION"):

        2.3.1   Tenant has delivered to Landlord a draw request ("DRAW REQUEST")
in the form of AIA Document G702 and G703 (or other form acceptable to Landlord)
specifying that the requisite portion of Tenant Improvements has been completed,
together with invoices, receipts and bills evidencing the costs and expenses set
forth in such Draw Request. The Draw Request shall constitute a representation
by Tenant that the Tenant Improvements identified therein have been completed in
a good and workmanlike manner and in accordance with the Approved Working
Drawings;

        2.3.2   The Architect has certified to Landlord that Tenant Improvements
have been completed to the level indicated in the Draw Request in accordance
with the Approved Working Drawings;

        2.3.3   Tenant has delivered to Landlord conditional lien releases from
the Contractor and all relevant subcontractors and materialmen with respect to
work covered by the current Draw Request and unconditional lien releases from
the Contractor and all relevant subcontractors and materialmen with respect to
work covered by prior Draw Requests;

        2.3.4   Landlord or Landlord's architect or construction representative
has inspected the Tenant Improvements and determined, in its reasonable judgment
and with all diligence, that the portion of the Tenant Improvements covered by
the Draw Request has been completed in a good and workmanlike manner, and
Landlord is satisfied, in its reasonable judgment, that the cost to complete the
Tenant Improvements does not exceed the remaining Tenant Improvement Allowance
and other sums available to Tenant for the payment of such costs.

2.4     DISBURSEMENT OF THE RETENTION. The Retention (as defined in Section 2.5
below) shall be disbursed only when Landlord has received Evidence of Completion
as to all of the Tenant Improvements as provided in Section 2.3 above and the
following conditions have been satisfied:

        (i)     Thirty (30) calendar days shall have elapsed following the
                filing of a valid notice of completion by Tenant for the Tenant
                Improvements;

        (ii)    A final or temporary certificate of occupancy for the Premises
                (if a temporary certificate, the conditions set forth therein
                shall be satisfactory to Landlord in its reasonable judgment)
                has been issued by the appropriate governmental body;

        (iii)   Tenant shall have delivered to Landlord one set of reproducible
                "As Built" plans for the Tenant Improvements as prepared by the
                Architect;

        (iv)    A complete list of the names, addresses, telephone numbers and
                contract amount for all contractors, subcontractors, vendors
                and/or suppliers providing materials and/or labor for the Tenant
                Improvements;

        (v)     No claim of lien shall be of record respecting the Tenant
                Improvements (however, if there is such a lien, this condition
                will be deemed satisfied if Tenant (i) bonds over such lien to
                Landlord's reasonable satisfaction or (ii) permits Landlord to
                retain an amount reasonably determined by Landlord to satisfy
                such lien until the same is released of record or otherwise
                bonded over to Landlord's reasonable satisfaction);

        (vi)    Tenant shall have delivered to Landlord conditional or
                unconditional lien releases, as applicable, in accordance with
                California Civil Code Section 3262 as to all of the Tenant
                Improvements;

        (vii)   Copies of all building permits, indicating inspection and
                approval of the Premises by the issuer of said permits; and

        (viii)  Tenant is not in default under the Lease and no circumstance
                exists that would, with notice or lapse of time, or both,
                constitute a default under the Lease.

                                       C-2
<PAGE>   46

Landlord, at any time after completion of the Tenant Improvements and upon at
least five (5) business days prior written notice to Tenant, may cause an audit
to be made of Tenant's books and records relating to Tenant's expenditures in
connection with the construction of the Tenant Improvements. Tenant shall
maintain complete and accurate books and records in accordance with generally
accepted accounting principles of these expenditures during the term. Tenant
shall make available to Landlord's auditor within three (3) business days
following Landlord's notice requiring the audit, all books and records
maintained by Tenant pertaining to the construction and completion of the Tenant
Improvements. In addition to all other remedies which Landlord may have pursuant
to the Lease, Landlord may recover from Tenant the reasonable cost of its audit
if the audit discloses that Tenant falsely reported to Landlord expenditures
which were not in fact made or falsely reported a material amount of any
expenditure or the aggregate expenditures.

2.5     LANDLORD'S PERCENTAGE. Provided the conditions described in Section 2.3
above are satisfied, Landlord will disburse, with respect to each Draw Request
(other than for the Retention), an amount equal to (a) the product of the Final
Costs (as defined in Section 4.2 below) included in the Draw Request multiplied
by Landlord's Rate, minus (b) 10% of the foregoing product (the "RETENTION").
"LANDLORD'S RATE" means the quotient of the Tenant Improvement Allowance divided
by the Final Costs. All Final Costs and other costs and expenses incurred in
connection with the design or construction of the Tenant Improvements in excess
of the Tenant Improvement Allowance shall be paid by Tenant.

2.6     STANDARD TENANT IMPROVEMENT PACKAGE. Landlord has established
specifications (the "SPECIFICATIONS") for the Building standard components to be
used in the construction of the Tenant Improvements in the Premises
(collectively, the "STANDARD IMPROVEMENT PACKAGE"), which Specifications
entitled Seaview Corporate Center Phase 11 Building Standard Materials and
Finishes have been received by Tenant. With respect to all other Tenant
Improvement components, Tenant shall utilize materials and finishes which are
not of lesser quality than the Specifications, unless otherwise approved by
Landlord. Landlord may make changes to the Specifications for the Standard
Improvement Package from time to time.

                                    SECTION 3

                              CONSTRUCTION DRAWINGS

3.1     SELECTION OF ARCHITECT/CONSTRUCTION DRAWINGS. Tenant has retained
Austin, Veum, Robbins, Parshalle (the "ARCHITECT") to prepare the Construction
Drawings. Tenant shall retain (i) an engineering consultant designated by
Landlord (the "ENGINEER") to prepare all plans and engineering working drawings
relating to structural work and (ii) subcontractors designated by Landlord for
the mechanical, plumbing and electrical trades (the "MPE SUBCONTRACTORS") to
prepare, on a design-build basis, all plans and engineering working drawings
relating to the mechanical, electrical, plumbing, HVAC, lifesafety, and
sprinkler work in the Premises. If the bid for an MPE Subcontractor is
materially higher than another bid for the same trade from a subcontractor that
is reasonably acceptable to Landlord, Tenant may utilize that subcontractor as
an MPE Subcontractor. The plans and drawings to be prepared by Architect, the
MPE Subcontractors and the Engineer hereunder shall be known collectively as the
"CONSTRUCTION DRAWINGS." All Construction Drawings shall comply with the drawing
format and specifications reasonably determined by Landlord, and shall be
subject to Landlord's approval. Tenant and Architect shall verify, in the field,
the dimensions and conditions as shown on the relevant portions of the base
building plans, and Tenant and Architect shall be solely responsible for the
same, and Landlord shall have no responsibility in connection therewith.
Landlord's review of the Construction Drawings as set forth in this Section 3,
shall be for its sole purpose and shall not imply Landlord's review of the same,
or obligate Landlord to review the same, for quality, design, Code compliance or
other like matters. Accordingly, notwithstanding that any Construction Drawings
are reviewed by Landlord or its space planner, architect, engineers and
consultants, and notwithstanding any advice or assistance which may be rendered
to Tenant by Landlord or Landlord's space planner, architect, engineers, and
consultants, Landlord shall have no liability whatsoever in connection therewith
and shall not be responsible for any omissions or errors contained in the
Construction Drawings.

3.2     FINAL SPACE PLAN. Tenant and Architect have prepared the final space
plan for Tenant Improvements in the Premises (the "FINAL SPACE PLAN"), which
Final Space Plan includes a layout and designation of all offices, rooms and
other partitioning, their intended use, and equipment to be contained therein,
and has delivered the Final Space Plan to Landlord for Landlord's approval.
Landlord shall diligently review the Final Space Plan and shall either approve
or disapprove the Final Space Plan within two (2) business days following the
date hereof, and if Landlord disapproves of any portion of the Final Space Plan,
the parties shall meet, within two (2) business days after Landlord's
disapproval, to agree upon revisions to be made to the Final Space Plan to meet
the reasonable satisfaction of Landlord and Tenant. The Architect shall then,
within two (2) business days after such meeting, revise the Final Space Plan to
the form agreed upon in such meeting. Landlord shall then approve or reasonably
disapprove the revised Final Space Plan, and in the case of disapproval, the
foregoing process shall be repeated until the Final Space Plan is approved by
Landlord.

3.3     FINAL WORKING DRAWINGS. Within twenty (20) business days following
Landlord's approval of the Final Space Plan, Tenant, Architect, the MPE
Subcontractors and the Engineer shall complete the architectural and engineering
drawings for the Premises, and Architect shall compile a fully coordinated set

                                       C-3
<PAGE>   47
of architectural, structural, mechanical, electrical and plumbing working
drawings in a form which is complete to allow subcontractors to bid on the work
and to obtain all applicable permits (collectively, the " FINAL WORKING
DRAWINGS"), and shall submit the same to Landlord for Landlord's approval.
Landlord shall diligently review the Final Working Drawings and shall either
approve or disapprove the Final Working Drawings within three (3) business days
following receipt thereof, and if Landlord disapproves of any portion of the
Final Working Drawings, the parties shall meet, within two (2) business days
after Landlord's disapproval, to agree upon revisions to be made to the Final
Working Drawings to meet the reasonable satisfaction of Landlord and Tenant. The
Architect shall then, within two (2) business days after such meeting, revise
the Final Working Drawings to the form agreed upon in such meeting. Landlord
shall then approve or reasonably disapprove the revised Final Working Drawings,
and in the case of disapproval, the foregoing process shall be repeated until
the Final Working Drawings are approved by Landlord.

3.4     APPROVED WORKING DRAWINGS. Within three (3) business days following
Landlord's approval of the Final Working Drawings (the "APPROVED WORKING
DRAWINGS"), Tenant shall submit the Approved Working Drawings to the applicable
local governmental agency for all applicable building permits necessary to allow
"Contractor," as that term is defined in Section 4.1 of this Work Letter
Agreement, to commence and fully complete the construction of the Tenant
Improvements (collectively, the "PERMITS"), and, in connection therewith, Tenant
shall coordinate with Landlord in order to allow Landlord, at Landlord's option,
to take part in all phases of the permitting process, and shall supply Landlord,
as soon as possible, with all plan check numbers and dates of submittal.
Notwithstanding the foregoing, Tenant hereby agrees that neither Landlord nor
Landlord's consultants shall be responsible for obtaining any building permit or
certificate of occupancy for the Premises and that the obtaining of the same
shall be Tenant's responsibility; provided, however, that Landlord shall, in any
event, cooperate with Tenant in executing permit applications and performing
other ministerial acts reasonably necessary to enable Tenant to obtain any such
permit or certificate of occupancy. No changes, modifications or alterations in
the Approved Working Drawings may be made without the prior written consent of
Landlord.

3.5     TIME DEADLINES. Tenant shall cooperate with Architect, the MPE
Subcontractors, the Engineer, and Landlord to complete all phases of the
Construction Drawings and the permitting process and to receive the Permits in
accordance with the dates set forth in this Work Letter. Tenant shall meet with
Landlord on a weekly basis (or more frequently, if necessary) to discuss
Tenant's progress in connection with the same.

                                    SECTION 4

                       CONSTRUCTION OF TENANT IMPROVEMENTS

4.1     TENANT'S SELECTION OF CONTRACTOR AND TENANT'S AGENTS.

        4.1.1   THE CONTRACTOR. Bilbro Construction Company shall be retained by
Tenant to construct the Tenant Improvements.

        4.1.2   TENANT'S AGENTS. All subcontractors, laborers, materialmen, and
suppliers used by Tenant, including the MPE Subcontractors (such subcontractors,
laborers, materialmen, and suppliers, and the Contractor to be known
collectively as "TENANT'S AGENTS"), and all bids from Tenant's Agents, must be
approved in writing by Landlord, which approval shall not be unreasonably
withheld or delayed. In addition to the MPE Subcontractors, Tenant shall utilize
subcontractors designated by Landlord for the following trades: structural
systems and roofing; provided, however, with respect to any such trade, if the
bid by Landlord's designated subcontractor is materially higher than another bid
received from a subcontractor that is reasonably acceptable to Landlord, Tenant
may utilize such other subcontractor.

4.2     CONSTRUCTION CONTRACT; COST BUDGET. Prior to Tenant's execution of the
construction contract and general conditions with Contractor (the "CONTRACT"),
Tenant shall submit the Contract and the Final Costs (as defined below) to
Landlord for its approval, which approval shall not be unreasonably withheld or
delayed. The Contract shall provide for a guaranteed maximum price and shall
permit the assignment of the Contract to Landlord, at Landlord's option, if the
Lease terminates as a result of Tenant's default. As soon as reasonably
practicable, Tenant shall provide to Landlord for Landlord's approval, a
detailed breakdown, by trade, of the final costs to be incurred, or which have
been incurred, as set forth more particularly in Section 2.2, in connection with
the design and construction of the Tenant Improvements, which costs form a basis
for the amount of the Contract (the "FINAL COSTS"). Tenant shall cause
Contractor to obtain a payment and performance bond from a surety reasonably
acceptable to Landlord in the amount of the Final Costs.

4.3     LANDLORD SUPERVISION. Landlord shall not charge Tenant, or deduct from
the Tenant Improvement Allowance, any supervision Fee.

4.4     CONTRACTOR'S WARRANTIES AND GUARANTIES. Tenant shall require Contractor
to provide standard customary warranties and guaranties relating to the Tenant
Improvements. Tenant will assign to Landlord all warranties and guaranties by
Contractor relating to the Tenant Improvements (i) to the extent necessary to
perform Landlord's obligations under the Lease and (ii) upon the termination of
this Lease. Tenant hereby waives all claims against Landlord relating to, or
arising out of the construction of, the Tenant Improvements.

                                       C-4

<PAGE>   48
4.5     TENANT'S COVENANTS. Tenant hereby indemnifies Landlord for any loss,
claims, damages or delays arising from the actions of Architect, the Engineer
(but only to the extent such actions relate to the Tenant Improvements) and
Tenant's Agents on the Premises or in the Building. Within ten (10) days after
completion of construction of the Tenant Improvements, Tenant shall cause
Contractor and Architect to cause a Notice of Completion to be recorded in the
office of the Recorder of the County in which the Building is located in
accordance with Section 3093 of the Civil Code of the State of California or any
successor statute and furnish a copy thereof to Tenant upon recordation.

4.6     LANDLORD'S GENERAL CONDITIONS FOR TENANT'S AGENTS AND TENANT IMPROVEMENT
WORK. Tenant and Tenant's Agents' construction of the Tenant Improvements shall
comply with the following: (i) the Tenant Improvements shall be constructed in
strict accordance with the Approved Working Drawings; (ii) Tenant and Tenant's
Agents shall not, in any way, interfere with, obstruct, or delay, Landlord's
Work or any other work in the Building; and (iii) Tenant shall abide by all
reasonable rules made by Landlord's Building contractor or Landlord's Building
manager with respect to the use of freight, loading dock and service elevators,
storage of materials, coordination of work with the contractors of other
tenants, and any other matter in connection with this Tenant Work Letter,
including, without limitation, the construction of the Tenant Improvements.
Subject to such reasonable rules and regulations, Tenant shall have the same
rights of access to the Building as applies to all other tenants or contractors
to the extent necessary to perform Tenant's obligations under this Work Letter
Agreement.

4.7     INSURANCE REQUIREMENTS.

        4.7.1   GENERAL COVERAGES. All of Tenants Agents shall carry worker's
compensation insurance covering all of their respective employees, and shall
also carry public liability insurance, including property damage, all with
limits, in form and with companies as are required to be carried by Tenant as
set forth in this Lease, except that the public liability insurance limits shall
be at least One Million Dollars ($1,000,000.00).

        4.7.2   SPECIAL COVERAGES. Tenant shall carry "Builder's All Risk"
insurance in an amount and in a form approved by Landlord covering the
construction of the Tenant Improvements, and such other insurance as Landlord
may reasonably require. Such insurance shall be in form and with companies as
are required to be carried by Tenant as set forth in the Lease.

        4.7.3   GENERAL TERMS. Certificates for all insurance carried pursuant
to this Section 4.7 shall be delivered to Landlord before the commencement of
construction of the Tenant Improvements and before the Contractor's equipment is
moved onto the site. All such policies of insurance must contain a provision
that the company writing said policy will give Landlord thirty (30) days prior
written notice of any cancellation or lapse of the effective date or any
reduction in the amounts of such insurance. In the event that the Tenant
Improvements are damaged by any risk that is of a type covered by the "Builder's
All Risk" insurance required to be maintained by Tenant during the course of the
construction thereof, Tenant shall immediately repair the same at Tenant's sole
cost and expense. All policies carried under this Section 4.6 shall insure
Landlord and Tenant, as their interests may appear, as well as Contractor and
Tenant's Agents, and shall name as additional insureds all mortgagees and ground
lessors of the Building and such other persons or entities designated by
Landlord. All insurance maintained by Tenant's Agents shall preclude subrogation
claims by the insurer against anyone insured thereunder. Such insurance shall
provide that it is primary insurance as respects the owner and that any other
insurance maintained by owner is excess and noncontributing with the insurance
required hereunder.

4.8     GOVERNMENTAL COMPLIANCE. The Tenant Improvements shall comply in all
respects with the following: (i) the Code and other state, federal, city or
quasi-governmental laws, codes, ordinances and regulations, as each may apply
according to the rulings of the controlling public official, agent or other
person; (ii) applicable standards of the American Insurance Association
(formerly, the National Board of Fire Underwriters) and the National Electrical
Code; and (iii) building material manufacturer's specifications.

4.9     INSPECTION BY LANDLORD. Landlord shall have the right to inspect the
Tenant Improvements at all times, provided, however, that Landlord's failure to
inspect the Tenant Improvements shall in no event constitute a waiver of any of
Landlord's rights hereunder nor shall Landlord's inspection of the Tenant
Improvements constitute Landlord's approval of the same. Should Landlord
disapprove any portion of the Tenant Improvements, Landlord shall notify Tenant
in writing of such disapproval and shall specify the items disapproved. Any
defects or deviations in, and/or disapproval by Landlord of, the Tenant
Improvements shall be rectified by Tenant at no expense to Landlord, provided,
however, that in the event Landlord determines that a defect or deviation exists
or disapproves of any matter in connection with any portion of the Tenant
Improvements and such defect, deviation or matter might adversely affect the
mechanical, electrical, plumbing, heating, ventilating and air conditioning or
life-safety systems of the Building, the structure or exterior appearance of the
Building or any other tenant's use of such other tenant's leased premises,
Landlord may take such action as Landlord deems necessary, at Tenant's expense
and without incurring any liability on Landlord's part, to correct any such
defect, deviation and/or matter, including, without limitation, causing the
cessation of performance of the construction of the Tenant Improvements until
such time as the defect, deviation and/or matter is corrected to Landlord's
satisfaction.

4.10    MEETINGS. Tenant shall hold weekly (or more frequently, if necessary)
meetings at a reasonable time, with the Architect and the Contractor regarding
the progress of the preparation of Construction Drawings and the construction of
the Tenant Improvements, and Landlord and/or its agents shall receive

                                       C-5

<PAGE>   49
prior notice of, and shall have the right to attend, all such meetings, and,
upon Landlord's request, certain of Tenant's Agents shall attend such meetings.
In addition, minutes shall be taken at all such meetings, a copy of which
minutes shall be promptly delivered to Landlord. One such meeting each month
shall include the review of Contractor's current request for payment.

4.11    COPY OF "AS BUILT" PLANS. At the conclusion of construction, (i) Tenant
shall cause the Architect and Contractor (A) to update the Approved Working
Drawings as necessary to reflect all changes made to the Approved Working
Drawings during the course of construction, (B) to certify to the best of their
knowledge that the "record-set" of as-built drawings are true and correct, which
certification shall survive the expiration or termination of the Lease, and (C)
to deliver to Landlord two (2) sets of sepias of such as-built drawings within
ninety (90) days following issuance of a certificate of occupancy for the
Premises, and (ii) Tenant shall deliver to Landlord a copy of all warranties,
guaranties, and operating manuals and information relating to the improvements,
equipment, and systems in the Premises.

4.12    COORDINATION BY TENANT'S AGENTS WITH LANDLORD. Upon Tenant's delivery of
the Contract to Landlord under Section 4.2. of this Tenant Work Letter, Tenant
shall furnish Landlord with a schedule setting forth the projected date of the
completion of the Tenant Improvements and showing the critical time deadlines
for each phase, item or trade relating to the construction of the Tenant
Improvements.

                                    SECTION 5

                 SUBSTANTIAL COMPLETION/LEASE COMMENCEMENT DATE

5.1     SUBSTANTIAL COMPLETION. For purposes of this Lease, "SUBSTANTIAL
COMPLETION" of the Tenant Improvements shall occur upon the completion of
construction of the Tenant Improvements in the Premises pursuant to the Approved
Working Drawings, with the exception of any punchlist items, and the issuance of
a certificate of occupancy (temporary or permanent) or other similar evidence of
acceptance from the appropriate local governmental authority permitting
occupancy of the Premises.

5.2     COMMENCEMENT DATE DELAYS. The Commencement Date shall occur as provided
in Section 1.7 of the Summary. However, if Substantial Completion is delayed
beyond the Target Date due to a Permit Delay, a Landlord Caused Delay or an
Unavoidable Delay, as those terms are defined below, then the Target Date, for
purposes of establishing the Commencement Date, shall be extended by the number
of days equal to the number of days of the Permit Delay, the Landlord Caused
Delay and/or the Unavoidable Delay. The term "PERMIT DELAY" shall mean an actual
delay in Substantial Completion beyond the Target Date resulting from the
issuance of the Permits after the date that is twenty (20) business days
following Tenant's submission to the appropriate governmental authorities of a
complete application for the Permits (however, delays caused by incomplete or
inaccurate submissions by Tenant, Tenant's failure to respond to inquiries or
requested changes by the governmental authorities with due diligence or changes
to submissions by Tenant shall not constitute a Permit Delay). The term,
"LANDLORD CAUSED DELAY" shall mean an actual delay in Substantial Completion
beyond the Target Date to the extent resulting from (i) the material
interference by Landlord, its agents or contractors with Substantial Completion,
(ii) Landlord's failure to abide by the time periods required of Landlord for
approvals hereunder, (iii) Landlord's failure to substantially complete and
deliver Landlord's Work prior to the Target Date or (iv) the failure of an MPE
Contractor designated by Landlord or any other subcontractor designated by
Landlord to perform its work in a timely manner (a "timely manner" shall mean
the time that the work could have been reasonably performed by another similarly
qualified contractor who would have otherwise been available to Tenant were it
not for Landlord's designation of the subcontractor in question). The term
"UNAVOIDABLE DELAY" shall mean an actual delay in Substantial Completion beyond
the Target Date resulting from a Force Majeure Delay, but excluding delays
resulting from the inability to procure materials and delays caused by the acts
or omissions of Tenant's Agents, the Architect or the Engineer (but only to the
extent the acts or omissions of the Engineer relate to the Tenant Improvements).
If Tenant contends that a Permit Delay, a Landlord Caused Delay or an
Unavoidable Delay has occurred, Tenant shall notify Landlord in writing (the
"DELAY NOTICE") of the event which constitutes such delay and the delay shall be
deemed to have occurred commencing as of the date of the commencement of such
delay provided Tenant gives Landlord written notice of such delay within two (2)
business days after the date Tenant first has knowledge of such delay, otherwise
such delay will be deemed to have occurred commencing as of the date of
Landlord's receipt of the Delay Notice. In the event of a dispute as to any such
Landlord Caused Delay, Permit Delay or Unavoidable Delay, a mutually acceptable
architect shall determine the existence and extent of the delay.

Notwithstanding the foregoing, if Tenant fails to submit to the appropriate
governmental authorities a complete application for the Permits by September 14,
1999 (as such date is subject to extension on a day for day basis for each day
of delay in Tenant's submission due to Landlord's failure to comply with the
time periods required of Landlord for approvals hereunder), then the number of
days for the extension of the Target Date due to Permit Delays as provided above
will be reduced by one (1) day for each day that Tenant delays in making such
submission beyond September 14, 1999 (as such date may be extended as provided
above).

5.3     DELIVERY OF POSSESSION. Landlord agrees to deliver possession of the
Premises to Tenant within one (1) business day following the full execution and
delivery of the Lease and Tenant's delivery to

                                       C-6

<PAGE>   50
Landlord of the Security Deposit, the Letter of Credit, the first full month's
Monthly Basic Rent and evidence that Tenant has obtained the insurance required
under the Lease.

                                    SECTION 6

                                  MISCELLANEOUS

6.1     TENANT'S REPRESENTATIVE. Tenant has designated Michael Reynolds and Kirt
Gilliland as its representatives with respect to the matters set forth in this
Work Letter Agreement, either of whom shall, until further notice from tenant to
Landlord, have full authority and responsibility to act on behalf of the Tenant
as required in this Work Letter Agreement.

6.2     LANDLORD'S REPRESENTATIVE. Landlord has designated Bob Wade and Steve
Muller as its representatives with respect to the matters set forth in this Work
Letter Agreement, either of whom, until further notice to Tenant, shall have
full authority and responsibility to act on behalf of the Landlord as required
in this Work Letter Agreement.

6.3     TIME OF THE ESSENCE IN THIS WORK LETTER AGREEMENT. Unless otherwise
indicated, all references herein to a "NUMBER OF DAYS" shall mean and refer to
business days. In all instances where Tenant is required to approve or deliver
an item, if no written notice of approval is given or the item is not delivered
within the stated time period, at Landlord's sole option, at the end of said
period the item shall automatically be deemed approved or delivered by Tenant
and the next succeeding time period shall commence.

6.4     TENANT'S LEASE DEFAULT. Notwithstanding any provision to the contrary
contained in the Lease, if an event of default by Tenant as described in Section
23.1 of the Lease or any default by Tenant under this Work Letter Agreement has
occurred at any time on or before the Substantial Completion of the Premises,
then (i) in addition to all other rights and remedies granted to Landlord
pursuant to the Lease, Landlord shall have the right to withhold payment of all
or any portion of the Tenant Improvement Allowance and/or Landlord may cause
Contractor to cease the construction of the Premises, and (ii) all other
obligations of Landlord under the terms of this Work Letter Agreement shall be
forgiven until such time as such default is cured pursuant to the terms of the
Lease.

6.5     SERVICES. In no event will Tenant be charged for utilities prior to the
Commencement Date. Landlord shall, at no cost to Tenant but consistent with the
obligations to other tenants of the Building, make an elevator available for
Tenant in connection with Tenant's construction activities, initial decorating,
furnishing and moving into the Premises.

6.6     FORCE MAJEURE DELAYS. For purposes of this Work Letter Agreement, "FORCE
MAJEURE DELAYS" means any actual delay in the construction of the Tenant
Improvements, which is beyond the reasonable control of Landlord or Tenant, as
the case may be, as described in Section 32.15 of the Lease.

                                       C-7
<PAGE>   51
                                  SCHEDULE "1"

                 DESCRIPTION OF BASE, SHELL AND CORE COMPONENTS

1.      Smooth and level floor (1/4" to 10') ready for carpet or other floor
        coverings;

2.      Two (2) four-inch (4") fiber optic conduits to the Building;

3.      Completed telephone and electrical closets;

4.      Completed and painted fire stairwells;

5.      Sheet rocked, taped, mudded and sanded perimeter of inside walls and
        elevator lobby and fire rated vestibule including total doors;

6.      Main electrical distribution with switchgear and circuit breakers for
        lighting and distribution of power to each floor;

7.      Multi-zone central plant for HVAC system complying with the
        Specifications and the HVAC water loop and outside air loop;

8.      Fire protection system including primary sprinkler loop. (Sprinkler
        distribution and heads will be located and dropped as part of the Tenant
        Improvement Allowance);

9.      Base Building plumbing (hot and cold water) brought to the Premises;
        Base Building restrooms per ADA standards; and

10.     Security and access systems controlling access to the Building and each
        floor,

                          SCHEDULE "1" to EXHIBIT "C"

<PAGE>   52

                                   EXHIBIT "D"

                    SAMPLE FORM OF NOTICE OF LEASE TERM DATES

To:_____________________________________         Date:_________________________

Re:    Office    Lease      dated __________________________,  19__   between
__________________________, a ______________________________, Landlord, and
__________________________, a ______________________________, Tenant, concerning
Suite _____ ("PREMISES") located at _________________________________.

Gentlemen:

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

1.      That the Premises have been accepted by Tenant as being substantially
        complete in accordance with the Lease, and that there is no known
        deficiency in construction.

2.      That Tenant has accepted and is in possession of the Premises, and
        acknowledges that under the provisions of the Lease, the Term of the
        Lease is for _________________ (___) years, with ________________ (___)
        options to renew for ____________ (______) years each, and commenced
        upon the Commencement Date of ______________, 19__ and is currently
        scheduled to expire on _____________________, 19__, subject to earlier
        termination as provided in the Lease.

3.      That in accordance with the Lease, rental payment has commenced (or
        shall commence) on ______________________, 19__.

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

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

6.      The exact number of rentable square feet within the Premises is
        _____________ square feet. The exact number of usable square
        feet within the Premises is____________ square feet.

7.      Tenant's Percentage, as adjusted based upon the exact number of Rentable
        Square Feet within the Premises, is _________%.

                               AGREED AND ACCEPTED

TENANT:                                    LANDLORD:

____________________________________,      ___________________________________,
a __________________________________       a __________________________________

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

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

                         SAMPLE ONLY [NOT FOR EXECUTION]

                                   EXHIBIT "D"

<PAGE>   53

                                   EXHIBIT "E"

                              RULES AND REGULATIONS

1.      No sign, advertisement, name or notice shall be installed or displayed
on any part of the outside or inside of the Building without the prior written
consent of Landlord. Landlord shall have the right to remove, at Tenant's
expense and without notice, any sign installed or displayed in violation of this
rule. All approved signs or lettering on doors and walls shall be printed,
painted, affixed or inscribed at the expense of Tenant by a person approved by
Landlord, using materials and in a style and format approved by Landlord.

2.      Tenant shall not place anything or allow anything to be placed near the
glass of any window, door, partition or wall which may appear unsightly from
outside the Premises. No awnings or other projection shall be attached to the
outside walls of the Building without the prior written consent of Landlord. No
curtains, blinds, shades or screens shall be attached to or hung in, or used in
connection with, any window or door of the Premises, other than Building
standard materials, without the prior written consent of Landlord.

3.      Tenant shall not obstruct any sidewalks, halls, passages, exits,
entrances, elevators, escalators or stairways of the Building. The halls,
passages, exits, entrances, elevators, escalators and stairways are not for the
general public, and Landlord shall in all cases retain the right to control and
prevent access thereto of all persons whose presence in the judgment of Landlord
would be prejudicial to the safety, character, reputation and interests of the
Building and its tenants; provided, that nothing herein contained shall be
construed to prevent such access to persons with whom any tenant normally deals
in the ordinary course of its business, unless such persons are engaged in
illegal activities. Except as otherwise provided in the Lease, Tenant and no
employee, invitee, agent, licensee or contractor of Tenant shall go upon or be
entitled to use any portion of the roof of the Building.

4.      The directory of the Building will be provided exclusively for the
display of the name and location of tenants only, and Landlord reserves the
right to exclude any other names therefrom.

5.      All cleaning and janitorial services for the Building and the Premises
shall be provided exclusively through Landlord or Landlord's janitorial
contractors in accordance with the provisions of Section 18.1(d) of the Lease.
No person or persons other than those approved by Landlord shall be employed by
Tenant or permitted to enter the Building for the purpose of cleaning the same.
Tenant shall not cause any unnecessary labor by carelessness or indifference to
the good order and cleanliness of the Premises.

6.      Landlord will furnish Tenant, free of charge, with two keys to each door
lock in the Premises. Landlord may impose a reasonable charge for any additional
keys. Tenant may not make or have made additional keys, and Tenant shall not
alter any lock or install a new additional lock or bolt on any door or window of
its Premises. Tenant, upon termination of its tenancy, shall deliver to Landlord
the keys of all doors which have been furnished to, or otherwise procured by
Tenant, and, in the event of loss of any keys, shall pay Landlord the cost of
replacing the same or of changing the lock or locks opened by such lost key if
Landlord shall deem it necessary to make such change.

7.      Electric wires, telephones, telegraphs, burglar alarms or other similar
apparatus shall not be installed in the Premises except with the approval and
under the direction of Landlord or as otherwise provided in the Lease. Except as
otherwise provided in the Lease, the location of telephones, call boxes and any
other equipment affixed to the Premises shall be subject to the approval of
Landlord. Any installation of telephones, telegraphs, electric wires or other
electric apparatus made without permission or otherwise in accordance with the
Lease shall be removed by Tenant at Tenant's own expense. Except as otherwise
provided in the Lease, no machines other than standard office machines, such as
typewriters and calculators, photo copiers, personal computers and word.
processors, and vending machines permitted by the Lease, shall be used in the
Premises without the approval of Landlord.

8.      No furniture, freight, or equipment of any kind shall be brought into
the Building without prior notice to Landlord and all moving of the same into or
out of the Building shall be done at such time and in such manner as Landlord
shall designate. No furniture, equipment or merchandise shall be received in the
Building or carried up or down in the elevator, except between such hours as
shall be designated by Landlord. Deliveries during normal office hours shall be
limited to normal office supplies and other small items. No deliveries shall be
made which impede or interfere with other tenants or the operation of the
Building.

9.      Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry (unless
structural support is provided that is acceptable to Landlord) and which is
allowed by law. Landlord shall have the right to prescribe the weight, size and
position of all equipment, materials, furniture or other property brought into
the Building. Heavy objects, if such objects are considered necessary by Tenant,
as determined by Landlord, shall stand on such platforms as determined by
Landlord to be necessary to properly distribute the weight. Business machines
and mechanical equipment which cause noise or vibration that may be transmitted
to the structure of the Building or to any space therein to such a degree as to
be objectionable to Landlord or to

                                   EXHIBIT "E"

<PAGE>   54
any tenants in the Building, shall be placed and maintained by Tenant, at
Tenant's expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration. Landlord will not be responsible for loss of, or
damage to, any such equipment or other property from any cause, and all damage
done to the Building by maintaining or moving such equipment or other property
shall be repaired at the expense of Tenant.

10.     Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited quantities
necessary for the operation or maintenance of office equipment or Tenant's
back-up generator. Tenant shall not use or permit to be used in the Premises any
foul or noxious gas or substance, or permit or allow the Premises to be occupied
or used in a manner offensive or objectionable to Landlord or other occupants of
the Project by reason of noise, odors or vibrations, nor shall Tenant bring into
or keep in or about the Premises any birds or animals.

11.     Except as otherwise provided in the Lease, Tenant shall not use any
method of heating or airconditioning other than that supplied by Landlord.

12.     Tenant shall not waste electricity, water or air-conditioning and agrees
to cooperate fully with Landlord to assure the most effective operation of the
Building's heating and air-conditioning and to comply with any governmental
energy-saving rules, laws or regulations of which Tenant has actual notice, and
shall not adjust controls other than room thermostats installed for Tenant's
use. Tenant shall keep corridor doors closed and shall close window coverings at
the end of each business day.

13.     Landlord reserves the right from time to time, in Landlord's sole and
absolute discretion, exercisable without prior notice and without liability to
Tenant, to: (a) name or change the name of the Building, Site or Project; (b)
change the address of the Building or Project, and/or (c) install, replace or
change any signs in, on or about the Common Areas, the Building or Site (except
for Tenant's signs, if any, which are expressly permitted by the Lease).

14.     Landlord reserves the right to exclude from the Building between the
hours of 6:00 p.m. and 7:00 a.m., or such other hours as may be established from
time to time by Landlord, and on legal holidays, any person unless that person
is known to the person or employee in charge of the Building and has a pass or
is properly identified. Landlord shall not be liable for damages for any error
with regard to the admission to or exclusion from the Building of any person.
Tenant shall be responsible for all persons for whom it requests passes and
shall be liable to Landlord for all acts of such persons. Landlord reserves the
right to prevent access to the Building in case of invasion, mob, riot, public
excitement or other commotion by closing the doors or by other appropriate
action.

15.     Tenant shall close and lock all doors of its Premises and entirely shut
off all water faucets or other water apparatus, and, except with regard to
Tenant's computers and other equipment which reasonably require electricity on a
24-hour basis, all electricity, gas or air outlets before Tenant and its
employees leave the Premises. Tenant shall be responsible for any damage or
injuries sustained by other tenants or occupants of the Building or by Landlord
for noncompliance with this rule.

16.     The toilet rooms, toilets, urinals, wash bowls and other apparatus shall
not be used for any purpose other than that for which they were constructed, and
no foreign substances of any kind whatsoever shall be thrown therein.

17.     Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets, or any other goods or merchandise to
the general public in or on the Premises. Tenant shall not make any room-to-room
solicitation of business from other tenants in the Project. Tenant shall not use
the Premises for any business or activity other than that specifically provided
for in the Lease.

18.     Except as otherwise provided in the Lease, Tenant shall not install any
radio or television antenna, loudspeaker or other device on the roof or exterior
walls of the Building. Tenant shall not interfere with radio or television
broadcasting or reception from or in the Building or elsewhere.

19.     Except as expressly permitted in the Lease, Tenant shall not mark, drive
nails, screw or drill into the partitions, window mullions, woodwork or plaster,
or in any way deface the Premises or any part thereof, except to install normal
wall hangings. Tenant shall repair any damage resulting from noncompliance under
this rule.

20.     Except for vending machines used for Tenant's employees, Tenant shall
not install, maintain or operate upon the Premises any vending machines without
the prior written consent of Landlord, which shall not be unreasonably withheld.

21.     Canvassing, soliciting and distribution of handbills or any other
written material, and peddling in and around the Project or the Building are
expressly prohibited, and each tenant shall cooperate to prevent same.

                                       E-2

<PAGE>   55
22.     Landlord reserves the right to exclude or expel from the Project and/or
the Building any person who, in Landlord's judgment, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the Rules and
Regulations of the Project or Building.

23.     Tenant shall store all its trash and garbage within its Premises. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of trash and garbage disposal.
All garbage and refuse disposal shall be made in accordance with directions
reasonably issued from time to time by Landlord.

24.     The Premises shall not be used for the storage of merchandise held for
sale to the general public, or for lodging or for manufacturing of any kind. No
cooking shall be done or permitted by Tenant on the Premises, except that use by
Tenant of Underwriters' Laboratory-approved equipment for brewing coffee, tea,
hot chocolate and similar beverages shall be permitted and the use of a
microwave shall be permitted, provided that such equipment and use is in
accordance with all applicable federal, state, county and city laws, codes,
ordinances, rules and regulations.

25.     Tenant shall not use in any space, or in the public halls of the
Building, any hand trucks except those equipped with rubber tires and side
guards, or such other material-handling equipment as Landlord may approve.
Tenant shall not bring any other vehicles of any kind into the Building.

26.     Tenant shall not use the name of the Project or Building in connection
with, or in promoting or advertising, the business of Tenant, except for
Tenant's address.

27.     Tenant agrees that it shall comply with all fire and security
regulations that may be issued from time to time by Landlord, and Tenant also
shall provide Landlord with the name of a designated responsible employee to
represent Tenant in all matters pertaining to such fire or security regulations.
Tenant shall cooperate fully with Landlord in all matters concerning fire and
other emergency procedures.

28.     Tenant assumes any and all responsibility for protecting its Premises
from theft, robbery and pilferage. Such responsibility shall include keeping
doors locked and other means of entry to the Premises closed.

29.     Landlord may waive any one or more of these Rules and Regulations for
the benefit of Tenant or any other tenant, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of Tenant or any
other such tenant (except to the extent of such waiver), nor prevent Landlord
from thereafter enforcing any such Rules and Regulations against any and all of
the tenants in the Building; provided, however, Landlord Will not waive or
enforce such Rules and Regulations in a manner that would unreasonably interfere
with Tenant's rights under the Lease.

30.     These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease of premises in the Project or
Building.

31.     Landlord reserves the right to make such other and reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for safety,
security, care and cleanliness of the Project and/or Building and for the
preservation of good order therein. Tenant agrees to abide by all such Rules and
Regulations hereinabove stated and any additional rules and regulations which
are adopted.

32.     Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant's employees, agents, clients, customers, invitees or guests.

33.     Tenant shall not lay linoleum, tile, carpet or other similar floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except by a paste, or other material which may easily be removed with
water, the use of cement or other similar adhesive materials being expressly
prohibited. The method of affixing any such linoleum, tile, carpet or other
similar floor covering shall be subject to the approval of Landlord. The expense
of repairing any damage resulting from a violation of this rule shall be borne
by Tenant.

                          PARKING RULES AND REGULATIONS

In addition to the parking provisions contained in the Lease to which this
Exhibit "E" is attached, the following rules and regulations shall apply with
respect to the use of the Building's parking facilities.

1.      Every parker is required to park and lock his/her own vehicle. All
responsibility for damage to or loss of vehicles is assumed by the parker and
Landlord shall not be responsible for any such damage or loss by water, fire,
defective brakes, the act or omissions of others, theft, or for any other cause.

2.      Tenant shall not park or permit its employees to park in any parking
areas designated by Landlord as areas for parking by visitors to the Project.
Tenant shall not leave vehicles in the parking areas

                                       E-3

<PAGE>   56
overnight nor park any vehicles in the parking areas other than automobiles,
sport utility vehicles, pickups, motorcycles, motor driven or non-motor driven
bicycles or four wheeled trucks.

3.      Parking stickers or any other device or form of identification supplied
by Landlord as a condition of use of the parking facilities shall remain the
property of Landlord. Such parking identification device must be displayed as
requested and may not be mutilated in any manner. The serial number of the
parking identification device may not be obliterated. Devices are not
transferable and any device in the possession of an unauthorized holder will be
void.

4.      No overnight or extended term storage of vehicles shall be permitted.

5.      Vehicles must be parked entirely within painted stall lines of a single
parking stall.

6.      All directional signs and arrows must be observed.

7.      The speed limit within all parking areas shall be five (5) miles per
hour.

8.      Parking is prohibited: (a) in areas not striped for parking; (b) in
aisles; (c) where "no parking" signs are posted; (d) on ramps; (e) in
cross-hatched areas; and (f) in reserved spaces and in such other areas as may
be designated by Landlord or Landlord's parking operator.

9.      Loss or theft of parking identification devices must be reported to the
Management Office immediately, and a lost or stolen report must be filed by the
Tenant or user of such parking identification device at the time. Landlord has
the right to exclude any vehicle from the parking facilities that does not have
an identification device.

10.     Any parking identification devices reported lost or stolen found on any
unauthorized car will be confiscated and the illegal holder will be subject to
prosecution.

11.     Washing, waxing, cleaning or servicing of any vehicle in any area not
specifically reserved for such purpose is prohibited.

12.     The parking operators, managers or attendants are not authorized to make
or allow any exceptions to these rules and regulations.

13.     Tenant's continued right to park in the parking facilities is
conditioned upon Tenant abiding by these rules and regulations and those
contained in this Lease. Further, if the Lease terminates for any reason
whatsoever, Tenant's right to park in the parking facilities shall terminate
concurrently therewith.

14.     Tenant agrees to sign a parking agreement with Landlord or Landlord's
parking operator within five (5) days of request, which agreement shall provide
the manner of payment of monthly parking fees and otherwise be consistent with
the Lease and these rules and regulations.

15.     Landlord reserves the right to refuse the sale or use of monthly
stickers or other parking identification devices to any tenant or person who
willfully refuses to comply with these rules and regulations and all city, state
or federal ordinances, laws or agreements.

16.     Landlord reserves the right to establish and change parking fees, and to
modify and/or adopt such other reasonable and non-discriminatory rules and
regulations for the parking facilities as it deems necessary for the operation
of the parking facilities. Landlord may refuse to permit any person who violates
these rules to park in the parking facilities, and any violation of the rules
shall subject the vehicle to removal, at such vehicle owner's expense.

                                       E-4

<PAGE>   57
                                   EXHIBIT "F"
                   SAMPLE FORM OF TENANT ESTOPPEL CERTIFICATE

The undersigned ("TENANT") hereby certifies to ___________________________, a
____________________________________________________________ ("LANDLORD"), and
_______________________________________________, as follows:

1.      Attached hereto is a true, correct and complete copy of that certain
Office Lease dated ____________, 19__ between Landlord and Tenant (the "LEASE"),
which demises Premises which are located at ______________________________. The
Lease is now in full force and effect and has not been amended, modified or
supplemented, except as set forth in Section 6 below.

2.      The term of the Lease commenced on __________, 19__.

3.      The term of the Lease is currently scheduled to expire on _______, 19__.

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

5.      Tenant has no preferential right to purchase the Premises or any portion
of the Building or Site upon which the Premises are located, and Tenant has no
rights or options to expand into other space in the Building except:___________
______________________________________________.

6.      The Lease has: (initial One)

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

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

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

8.      The current Monthly Basic Rent is $ ___________________; and current
monthly parking charges are $________________.

9.      Tenant's Percentage is ___________%, and Tenant's Percentage of
Operating Expenses currently payable by Tenant is $____________ per month, which
amount is Landlord's current estimate of Tenant's Percentage of Operating
Expenses in excess of:

         (Complete One) $ _________________ per year (expense stop), or

                      the Operating Expenses incurred in calendar year _______.

10.     The amount of security deposit (if any) is $ ______________. No other
security deposits have been made.

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

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

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

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

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

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

                                   EXHIBIT "F"

<PAGE>   58
17.     There has not been filed by or against Tenant a petition in bankruptcy,
voluntary or otherwise, any assignment of creditors, any petition seeking
reorganization or arrangement under the bankruptcy laws of the United States or
any state thereof, or any other action brought pursuant to such bankruptcy laws
with respect to Tenant.

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

Dated:_________________________, 19__.

        "TENANT"

                                        _______________________________________
                                        a______________________________________

                                        By:____________________________________
                                        Print Name:____________________________
                                        Its:___________________________________

                                       F-2<PAGE>   1
                                                                 EXHIBIT 10.33

                                CREDIT AGREEMENT

This Credit Agreement ("Agreement") is made and entered into on August 4, 1999,
by and between WEBSIDESTORY, INC., a California corporation ("Borrower") and
IMPERIAL BANK, a California banking corporation, ("Bank").

Subject to the terms and conditions of this Agreement, any security
agreement(s) executed by Borrower in favor of Bank, any note(s) executed by
Borrower in favor of Bank, or any other agreements executed in conjunction
therewith (collectively, the "Loan Documents"), Bank shall make the loans and
or advances (individually a "Loan" and collectively "Loans") referred to below
to Borrower.

In consideration of mutual covenants and conditions hereof, the parties hereto
agree as follows:

1.   AMOUNT AND TERMS OF CREDIT

1.01 REVOLVING CREDIT COMMITMENT.

(a)       REVOLVING LINE OF CREDIT.  Subject to the terms and conditions of this
Agreement, provided that no event of default then has occurred and is
continuing, Bank shall, upon Borrower's request make advances ("Revolving
Loans") to Borrower, for general corporate purposes in an amount not to exceed
$4,000,000, with a sub-limit up to $1,000,000 to finance capital equipment
expenditures (the "Revolving Line of Credit. The Revolving Line of Credit shall
be available until August 2, 2000 ("Revolving Line of Credit Maturity Date").
Revolving Loans may be repaid and reborrowed, provided that all outstanding
principal and accrued interest on the Revolving Loans shall be payable in full
on the Revolving Credit Maturity Date.

(b)       EQUIPMENT DRAWS.  Equipment draws made under the Revolving Line of
Credit shall be converted to a term loan evidenced by a term note, which shall
provide for equal principal payments plus interest as follows:

               On the date that is 12 months from the date hereof, all
Revolving Loans made under the Revolving Line of Credit for equipment purchases
that are then-outstanding shall be converted to a term loan which shall be
evidenced by a 36 month term note.

          Equipment draws made under the Revolving Line of Credit may include
up to 100% of invoice value excluding soft costs, freight, and sales taxes.

          Each equipment advance shall require a detailed schedule of equipment
purchases and other expenses associated with each draw-down.

(c)       REVOLVING NOTE.  The interest rate, principal and interest payments,
maturity date and certain other terms of the Revolving Loan will be contained
in a promissory note dated the date of this agreement, as such may be amended
or replaced from time to time.

Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE>   2
(d)       LETTER OF CREDIT USAGE AND SUBLIMIT. Subject to availability under
the Revolving Line of Credit, at any time and from time to time from the date
hereof through the banking day immediately prior to the Revolving Line of
Credit Maturity Date, Bank shall issue for the account of Borrower such standby
and commercial letters of credit ("Letters of Credit") as Borrower may
request, which requests shall be made by delivering to Bank a duly executed
letter of credit application on Bank's standard form; provided, however, that
the outstanding and undrawn amounts under all such Letters of Credit (i) shall
not at any time exceed $360,000 ("Letter of Credit Sublimit") and (ii) shall be
deemed to constitute Revolving Loans for the purpose of calculating availability
under the Revolving Line of Credit. Unless agreed to in writing by Bank, no
Letter of Credit shall have an expiration date that is later than the Revolving
Line of Credit Maturity Date. All Letters of Credit shall be in form and
substance acceptable to Bank in its sole discretion and shall be subject to the
terms and conditions of Bank's form application and letter of credit agreement
and other agreements required by Bank. Borrower will pay all usual issuance and
other fees that Bank notifies Borrower will be charged for issuing and
processing Letters of Credit for Borrower.

(d)       LATE CHARGE. If any installment payment, interest payment, principal
payment or principal balance due under the Revolving Line of Credit is
delinquent ten (10) or more days, Borrower agrees to pay Bank a late charge in
the amount of five percent (5%) of the payment so due and unpaid, in addition
to the payment; but nothing in this paragraph is to be construed as any
obligation on the part of the Bank to accept payment of any payment past due or
less than the total unpaid principal balance after maturity. All payments, at
Bank's sole discretion, shall be applied first to any late charges owing, then
to interest and the remainder, if any, to principal.

(e)       DEFAULT RATE. If an Event of Default occurs hereunder, then during
the continuance thereof at the Bank's option, the interest rate shall be five
percent (5%) per year in excess of the rate otherwise applicable.

(f)       INTEREST CALCULATIONS. The term "Prime Rate" shall mean the rate that
the Bank has announced as its prime lending rate, which shall vary concurrently
with any change in the Prime Rate. Interest based on the Prime Rate shall vary
concurrently with any change in the Prime Rate. All interest shall be computed
at the rate specified in any note on the basis of the actual number of days
during which the principal balance of the corresponding Loans are outstanding
divided by 360, which shall for interest computation purposes be considered one
(1) year.

1.02      LOAN FEE. In addition to any other amounts due, or to become due,
concurrent with the execution hereof, in connection with the Revolving Line of
Credit, Borrower shall pay to Bank a loan fee of Five Thousand Dollars ($5,000).

1.03      DOCUMENTATION FEE, COSTS AND EXPENSES. In addition to any other
amounts due, or to become due, concurrently with the execution hereof, Borrower
agrees to pay to Bank a documentation fee in the amount of $500.00 and all
other costs and expenses incurred by the Bank in the preparation of this
Agreement, the other Loan Documents and the perfection of any security interest
granted to Bank by Borrower.

                                       2

Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE>   3
1.04 COLLATERAL. Borrower shall grant or cause to be granted to Bank a first
priority lien on any and all personal property assets of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest or pursuant to the terms of any
security agreement, an intellectual property security agreement or otherwise as
security for all of Borrower's obligations to Bank, all as may be subject to
Section 5.03 herein.

1.05 COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all interest,
fees, costs, and/or expenses due under this Agreement by charging Borrower's
demand deposit account number 38-051-660 with Bank, or any other demand deposit
account maintained by Borrower with Bank, for the full amount thereof. Should
there be insufficient funds in any such demand deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.

2. REPRESENTATIONS OF BORROWER

Borrower represents and warrants that:

2.01 EXISTENCE AND RIGHTS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the state of California,
without limit as to the duration of its existence. Borrower is authorized and
in good standing to do business in the state of its incorporation; Borrower has
the appropriate powers and adequate authority, rights and franchises to own its
property and to carry on its business as now conducted, and is duly qualified
and in good standing in the state in which the character of the properties
owned by it therein or the conduct of its business makes such qualification
necessary; and Borrower has the power and adequate authority to make and carry
out this Agreement. Borrower has no investment in any other business entity
unless specified in writing to Bank.

2.02 AGREEMENT AUTHORIZED. The execution, delivery and performance of this
Agreement and the Loan Documents are duly authorized and do not require the
consent or approval of any governmental body or other regulatory authority; are
not in contravention of or in conflict with any law or regulation or any term or
provision of Borrower's charter/articles of incorporation, or similar document
as the case may be, and this Agreement is the valid, binding and legally
enforceable obligation of Borrower in accordance with its terms; subject only to
bankruptcy, insolvency or similar laws affecting creditors rights generally.

2.03 NO CONFLICT. The execution, delivery and performance of this Agreement and
the Loan Documents are not in contravention of or in conflict with any
agreement, indenture or undertaking to which Borrower is a party or by which it
or any of its property may be bound or affected, and do not cause any lien,
change or other encumbrance to be created or imposed upon any such property by
reason thereof.

2.04 LITIGATION. Except as disclosed in writing to bank by Borrower, there is
no litigation or other proceeding pending or threatened against or affecting
Borrower which if determined adversely to Borrower or its interest would have a
material adverse effect on the

                                       3

Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE>   4
financial condition of Borrower, and Borrower is not in default with respect to
any order, writ, injunction, decree or demand of any court or other governmental
or regulatory authority.

2.05      FINANCIAL CONDITION.  The balance sheet of Borrower as of April 30,
1999, and the related profit and loss statement for the four-month period ended
as of that date, a copy of which has heretofore been delivered to Bank by
Borrower, and all other statements and data submitted in writing by Borrower to
Bank in connection with this request for credit are true and correct, and said
balance sheet truly presents the financial condition of Borrower as of the date
thereof, and has been prepared in accordance with generally accepted accounting
principles on a basis consistently maintained. Since such date there have been
no material adverse changes in the financial condition or business of Borrower.
Borrower has no knowledge of any liabilities, contingent or otherwise, at such
date not reflected in said balance sheet, and Borrower has not entered into any
special commitments or substantial contracts which are not reflected in said
balance sheet, other than in the ordinary and normal course of its business,
which may have a materially adverse effect upon its financial condition,
operations or business as now conducted.

2.06      TITLE TO ASSETS.  Borrower has good title to its assets, and the same
are not subject to any liens or encumbrances other than those permitted by
Section 5.03 hereof.

2.07      TAX STATUS.  Borrower has no liability for any delinquent state, local
or federal taxes, and, if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.

2.08      TRADEMARKS, PATENTS.  Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.

2.09      REGULATION U.  None of the proceeds of any Loan shall be used to
purchase or carry margin stock (as defined within Regulation U of the Board of
Governors of the Federal Reserve system).

2.10      ERISA.  All defined benefit pension plans as defined in the Employees
Retirement Income Security Act of 1974, as amended ("ERISA"), of Borrower meet,
as of the date hereof, the minimum funding standards of Section 302 of ERISA,
and no Reportable Event or Prohibited Transaction as defined in ERISA has
occurred with respect to any such plan.

2.11      YEAR 2000 COMPLIANCE.  Borrower and its subsidiaries, as applicable,
have reviewed the areas within their operations and business which could be
adversely affected by, and have developed or are developing a program to address
on a timely basis, the Year 2000 Problem and have made related appropriate
inquiry of material suppliers and vendors, and based on such review and program,
the Year 2000 Problem will not have a material adverse effect upon its financial
condition, operations or business as now conducted. "Year 2000 Problem" means
the possibility that any computer applications or equipment used by Borrower may
be unable to recognize and properly perform date sensitive functions involving
certain dates prior to and any dates on or after December 31, 1999.

                                       4

Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE>   5
3.   CONDITIONS PRECEDENT TO LOAN.

     Prior to Bank being obligated to make any Loan pursuant to this Agreement,
Bank must receive all of the following, each of which must be in form and
substance satisfactory to Bank:

3.01      PROMISSORY NOTE. Original, executed promissory note.

3.02      SECURITY AGREEMENT. Original, executed security agreement covering
the personal property collateral securing the Loan.

3.03      FINANCING STATEMENT. Financing statement executed by Borrower.

3.04      INSURANCE. Borrower shall have delivered to Bank evidence of
insurance coverage required pursuant to that Agreement to Provide Insurance
executed by Borrower, in form, substance, amounts, covering risks and issued by
companies satisfactory to Bank, and where required by Bank, with loss payable
endorsements in favor of Bank.

3.05      ORGANIZATIONAL DOCUMENTS. Copies of the charter/articles of
incorporation, or similar document as the case may be, of the Borrower.

3.06      AUTHORIZATIONS. Certified copies of all action taken by the Borrower
of a security interest to authorize the execution, delivery and performance of
the Loan Documents.

3.07      GOOD STANDING. Good standing certificates from the appropriate
secretary of state of the state in which the Borrower is organized.

3.08      ADDITIONAL DOCUMENTS. Such other documents as Bank may reasonably
deem necessary.

4.   AFFIRMATIVE COVENANTS OF BORROWER

Borrower agrees that so long as it is indebted to Bank, under borrowings, or
other indebtedness, or so long as Bank has any obligation to extend credit to
Borrower it will, unless Bank shall otherwise consent in writing:

4.01      RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.

4.02      USE OF PROCEEDS. Use the proceeds of the Loans only for purposes
specified in Section 1 of this Agreement.

                                       5

Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999

<PAGE>   6
4.03      INSURANCE.  Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses and/or in the exercise of good business
judgment, and as required by that Agreement to Provide Insurance executed by
Borrower, with the Bank to be shown as Lenders Loss Payee on such policies.

4.04      TAXES AND OTHER LIABILITIES.  Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and
all its other liabilities at any time existing, except to the extent and so long
as:

(a)       The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse effect upon
its financial condition or the loss of any right of redemption from any sale
thereunder; and

(b)       It shall have set aside on its books reserves (segregated to the
extent required by generally accepted accounting practice) deemed by it to be
adequate with respect thereto.

4.05      RECORDS AND REPORTS.  Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit Bank's representatives to have access to,
and to examine its properties, books and records at all reasonable times and
upon reasonable notice during normal business hours; and furnish Bank:

(a)       MONTHLY FINANCIAL STATEMENT. As soon as available, and in any event
within thirty (30) days after the close of each month, a balance sheet, profit
and loss statement and reconciliation of Borrower's capital balance accounts as
of the close of such period and covering operations for the portion of
Borrower's fiscal year ending on the last day of such period, all in reasonable
detail and reasonably acceptable to Bank, in accordance with generally accepted
accounting principles on a basis consistently maintained by Borrower and
certified by an appropriate officer of Borrower.

(b)       ANNUAL FINANCIAL STATEMENT. As soon as available, and in any event
within one hundred twenty (120) days after and as of the close of each fiscal
year of Borrower, a report of audit of Company, all in reasonable detail,
audited by an unqualified certified public accountant selected by Borrower and
reasonably acceptable to Bank, in accordance with generally accepted accounting
principles on a basis consistently maintained by Borrower and certified by an
appropriate officer of Borrower.

(c)       OFFICER'S CERTIFICATE. Within thirty (30) days after the end of each
month and fiscal year of Borrower, a certificate of the chief financial officer
of Borrower, stating that Borrower has performed and observed each and every
covenant contained in this Agreement to be performed by it and that no event
has occurred and no condition then exists which constitutes an event of default
hereunder or would constitute such an event of default upon the lapse of time
or upon the giving of notice and the lapse of time specified herein; or, if any
such event has occurred or any such condition exists, specifying the nature
thereof.

                                       6

Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999

<PAGE>   7
(d)  OTHER INFORMATION. Such other information relating to the affairs of
Borrower as the Bank reasonably may request from time to time.

4.06 MINIMUM LIQUIDITY. Maintain a minimum liquidity (defined as unrestricted
cash and cash equivalents plus net trade accounts receivable) measured monthly,
equal to the greater of one and one-half times (1.5x) current liabilities and
all bank debt.

4.07 MINIMUM PRE-TAX PROFIT. Maintain on a quarterly basis a minimum pre-tax
profit of not less than:

(a)  $251,000 for quarter ending September 30, 1999;

(b)  $721,000 for quarter ending December 31, 1999;

(c)  $1,002,000 for quarter ending March 31, 2000;

(d)  $1,178,000 for quarter ending June 30, 2000;

(e)  $1,555,000 for quarter ending September 30, 2000; and

(f)  $1,000,000 for quarter ending December 31, 2000 and each quarter end
     thereafter.

4.08 EQUIPMENT PURCHASES. Provide a detailed schedule of equipment purchases
and other expenses associated with each draw-down related to the Revolving Line
of Credit. Equipment draws to include 100% of invoice value excluding soft
costs, freight, and sales tax. Advances must be supported by invoice dated no
later than ninety (90) days prior to said advance.

4.09 ERISA. Cause all defined benefit pension plans, as defined in ERISA, of
Borrower to, at all times, meet the minimum funding standards of Section 302 of
ERISA, and ensure that no Reportable Event or Prohibited Transaction, as
defined in ERISA, will occur with respect to any such plan.

4.10 LAWS. At all times comply with, or cause to be complied with, all laws,
statutes, rules, regulations, orders and directions of any governmental
authority having jurisdiction over Borrower or Borrower's business.

4.11 GAAP. Compliance with all financial covenants shall be calculated based on
generally accepted accounting principles applied on a consistent basis as
maintained by Borrower.

4.12 YEAR 2000 COMPLIANT. Borrower shall perform all acts reasonably necessary
to ensure that (a) Borrower and any business in which Borrower holds a
substantial interest, and (b) all customers, suppliers and vendors whose
compliance is likely to be material to Borrower's business, become Year 2000
Compliant in a timely manner. Such acts shall include, without

                                       7

Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE>   8
limitation, performing a comprehensive review and assessment of all Borrower's
systems and adopting a detailed plan, with itemized budget, for the
remediation, monitoring and testing of such systems. As used in this paragraph,
"Year 2000 Compliant" shall mean, in regard to any entity, that all software,
hardware, firmware, equipment, goods or systems utilized by or material to the
business operations or financial condition of such entity, will properly
perform date sensitive functions before, during and after the year 2000.
Borrower shall, immediately upon request, provide to Agent such certifications
or other evidence of Borrower's compliance with the terms of this paragraph as
Bank may from time to time require.

4.13      OPERATING ACCOUNTS. Maintain all primary accounts and banking
relationship with the Bank.

4.14      NOTICES. Promptly notify Bank in writing of (i) the occurrence of any
Event of Default hereunder or any event which upon notice and lapse of time
would be an Event of Default; (ii) all litigation affecting Borrower where the
amount is $500,000 or more; any substantial dispute which may exist between
Borrower and any governmental regulatory body or law enforcement authority; any
change in Borrower's name or principal place of business; or any other matter
which has resulted or might result in a material adverse change in Borrower's
financial condition or operations.

5.        NEGATIVE COVENANTS OF BORROWER

Borrower agrees that so long as it is indebted to Bank, or so long as Bank has
any obligation to extend credit to Borrower, it will not, without Bank's
written consent:

5.01      TYPE OF BUSINESS. Make any substantial change in the character of its
business.

5.02      OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than Loans from the Bank except
obligations now existing as shown in the financial statement dated April, 1999,
excluding those obligations being refinanced by Bank, and other than those
Permitted Indebtedness or sell or transfer, either with or without recourse,
any accounts or notes receivable or any moneys due or to become due.

5.03      LIENS AND ENCUMBRANCES. Create, incur, permit to exist, or assume any
mortgage, pledge, encumbrance, lien or charge of any kind upon any asset now
owned or hereafter acquired by it, other than liens for taxes not delinquent,
liens arising by operation of law in the ordinary course of business, and liens
in Bank's favor and other than liens agreed to in writing by Bank.

5.04      LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or advances
to any person or other entity other than in the ordinary and normal course of
its business as now conducted or make any investment in the securities of any
person or other entity other than the United States Government; or guarantee or
otherwise become liable upon the obligation of any person or other entity,
except by endorsement of negotiable instruments for deposit or collection in
the ordinary and normal course of its business.

                                       8

Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE>   9
5.05      Acquisition or Sale of Business; Merger or Consolidation.  Purchase or
otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings therefor;
or sell any assets except in the ordinary and normal course of its business as
now conducted; or sell, lease, assign, or transfer any substantial part of its
business or fixed assets, or any property or other assets necessary for the
continuance of its business as now conducted, including without limitation the
selling of any property or other asset accompanied by the leasing back of the
same.

5.06      Dividends and Distributions.  Declare or pay any dividend or make any
other distribution on any of its capital stock now outstanding or hereafter
issued or purchased, redeem or retire any of such stock other than in dividends
or distributions payable in Borrower's capital stock, except for the repurchase
of Borrower's capital stock from officers, directors, employees or consultants
of Borrower upon termination of their employment with or rendering of service to
Borrower.

                                       9

Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE>   10
6.   EVENTS OF DEFAULT

The occurrence of any of the following events of default ("Events of Default")
shall, at Bank's option, terminate Bank's commitment to lend and make all sums
of principal and interest then remaining unpaid on all Borrower's indebtedness
to Bank immediately due and payable, all without demand, presentment or notice,
all of which are hereby expressly waived:

6.01      FAILURE TO PAY. Failure to pay any installment of principal or of
interest on any indebtedness of Borrower to Bank within, five (5) days of its
due date.

6.02      BREACH OF COVENANT. Failure of Borrower to perform any other term or
condition of this Agreement or any Loan Document binding upon Borrower.

6.03      BREACH OF WARRANTY. Any of Borrower's representations or warranties
made herein or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false or misleading in any
respect.

6.04      INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent; or
admit its inability to pay its debt as they mature; or make an assignment for
the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.

6.05      JUDGMENTS, ATTACHMENTS. Any money judgment in excess of $500,000,
writ or warrant of attachment, or similar process shall be entered or filed
against Borrower or any of its assets and shall remain unvacated, unbonded or
unstayed for a period of ten (10) days or in any event later than five (5) days
prior to the date of any proposed sale thereunder.

6.06      BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall not be dismissed within thirty (30) days
thereafter.

6.07      CESSATION OF BUSINESS. Borrower shall voluntarily suspend its
business.

6.08      ADVERSE CHANGE. Any change which, in the reasonable opinion of Bank,
is materially adverse to the financial condition of Borrower or which impairs
the prospect of Borrower's payment or performance hereunder or any other
agreement or instrument with Bank.

6.09      OTHER DEFAULTS. Borrower, or any Guarantor of Borrower's obligations
to Bank, shall commit or do or fail to commit or do any act or thing which
would constitute an event of default under any of the terms of any other
agreement, document or instrument executed or to be executed by it concerning
the obligation to pay money.

6.10      ADVANCES. Notwithstanding anything to the contrary contained herein,
Bank shall have no duty to make advances while any event of default exists
notwithstanding any cure period provided for herein.

                                       10

Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999

<PAGE>   11
7.   MISCELLANEOUS PROVISIONS

7.01      FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay on the part of
Bank or any holder of notes issued hereunder, in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Agreement or any note(s) issued in
connection with a Loan that Bank may make hereunder, are cumulative to, and not
exclusive of, any rights or remedies otherwise available.

7.02      COUNTERPARTS; ENTIRE AGREEMENT.  This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement, and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersedes any prior agreements, written or oral, with respect thereto.

7.03      ATTORNEY'S FEES.  Borrower will pay promptly to Bank without demand
after notice, with interest thereon from the date of expenditure at the rate
applicable to the Loan, reasonable attorney's fees and all costs and expenses
paid or incurred by Bank in collecting or compromising the Loan after the
occurrence of an Event of Default, whether or not suit is filed. If suit is
brought to enforce any provision of this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys' fees and court costs in
addition to any other remedy or recovery awarded by the court.

7.04      ADDITIONAL REMEDIES.  The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.

7.05      INUREMENT.  The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assigns of
Borrower.

7.06      APPLICABLE LAW.  This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the state of California, to the jurisdiction
of whose courts the parties hereby agree to submit.

7.07      OFFSET.  In addition to and not in limitation of all rights of offset
that Bank or other holder of the Loan may have under applicable law, Bank or
other holder of any note issued hereunder shall, upon the occurrence of any
Event of Default or any event which with the passage of time or notice would
constitute such an Event of Default, have the right to appropriate and apply to
the payment of the Loan any and all balances, credits, deposits, accounts or
monies of Borrower then or thereafter with Bank or other holder, within ten (10)
days after the Event of Default, and notice of the occurrence of any Event of
Default by Bank to Borrower.

                                       11

Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE>   12
7.08      SEVERABILITY.  Should any one or more provisions of the Agreement be
determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.

7.09      TIME OF THE ESSENCE.  Time is hereby declared to be of the essence of
this Agreement and of every part hereof.

7.10      ACCOUNTING.  All accounting terms shall have the meanings applied
under generally accepted accounting principles unless otherwise specified.

7.11      REFERENCE PROVISION.

(a)       Other than (i) nonjudicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property; or (ii)
the appointment of a receiver, or the exercise of other provisional remedies
(any and all of which may be initiated pursuant to applicable law), each
controversy, dispute or claim between the parties arising out of or relating to
this Credit Agreement, any security agreement executed by Borrower in favor of
Bank or any note executed by Borrower in favor of Bank or any other agreement
or instrument issued in favor of Bank by Borrower (collectively in this Section,
the "Agreement") which controversy, dispute or claim is not settled in writing
within thirty (30) days after the "Claim Date" (defined as the date on which a
party subject to this Agreement gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference
proceeding in California in accordance with the provisions of Section 638 et.
seq. of the California Code of Civil Procedure, or their successor section
("CCP"), which shall constitute the exclusive remedy for the settlement of any
controversy, dispute or claim concerning this Agreement, including whether such
controversy, dispute or claim is subject to the reference proceeding and except
as set forth above, the parties waive their rights to initiate any legal
proceedings against each other in any court or jurisdiction other than the
Superior Court in the County where the Real Property, if any, is located or Los
Angeles County if none (the "Court"). The referee shall be a retired Judge of
the Court selected by mutual agreement of the parties, and if they cannot so
agree within forty-five (45) days after the Claim Date, the referee shall be
promptly selected by the Presiding Judge of the Court (or his representative).
The referee shall be appointed to sit as a temporary judge, with all of the
powers for a temporary judge, as authorized by law, and upon selection should
take and subscribe to the oath of office as provided for in Rule 244 of the
California Rules of Court (or any subsequently enacted Rule). Each party shall
have one peremptory challenge pursuant to CCP Section 170.6. The referee shall
(a) be requested to set the matter for hearing within sixty (60) days after the
date of selection of the referee and (b) try any and all issues of law or fact
and report a statement of decision upon them, if possible, within ninety (90)
days of the Claim Date. Any decision rendered by the referee will be final,
binding and conclusive and judgment shall be entered pursuant to CCP Section
644 in any court in the state of California having jurisdiction. Any party may
apply for a reference proceeding at any time after thirty (30) days following
notice to any other party of the nature of the controversy, dispute or claim,
by filing a petition for a hearing and/or trial. All discovery permitted by this
Agreement shall be completed no later than fifteen (15) days before the first
hearing date established by the referee. The referee may extend such period in
the event of a party's refusal to provide requested discovery for any reason
whatsoever, including, without limitation, legal objections raised to such
discovery or unavailability of a witness due to absence or illness. No party
shall be entitled to "priority" in conducting discovery. Depositions may be
taken by either

                                       12

Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE>   13
party upon seven (7) days written notice, and request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided
herein, the Superior Court is empowered to issue temporary and/or provisional
remedies, as appropriate.

(b)  Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter except that when any
party so requests, a court reporter will be used at any hearing conducted
before the referee. The party making such a request shall have the obligation
to arrange for and pay for the court reporter. The costs of the court reporter
at the trial shall be borne equally by the parties.

(c)  The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the state of California. The rules
of evidence applicable to proceedings at law in the state of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding, which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of laws, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.

(d)  In the event that the enabling legislation which provides for appointment
of a referee is repealed (and no successor statute is enacted), any dispute
between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2
of the CCP as amended from time to time. The limitations with respect to
discovery as set forth hereinabove shall apply to any such arbitration
proceeding.

7.12 This Agreement may be modified only by a writing signed by all parties
hereto.

                                       13

Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE>   14
This Agreement is executed on behalf of the parties by duly authorized officers
as of the date first above written.

IMPERIAL BANK                               WEBSIDESTORY, INC.
("Bank")                                    ("Borrower")

By:
                                            By: /s/ ILLEGIBLE SIGNATURE
   -------------------------------             --------------------------------
                                                Authorized Officer

Its:                                        Its: PRESIDENT AND CEO
    ------------------------------             --------------------------------

                                            By: /s/ Michael D. Reynolds
                                               --------------------------------
                                                Authorized Officer

                                            Its: VICE PRESIDENT, FINANCE AND CFO
                                                --------------------------------

                                       14

Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999

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