Document:

<PAGE>   1
                                                                   EXHIBIT 10.27

                     STANDARD MULTI-TENANT INDUSTRIAL LEASE

                                 BY AND BETWEEN

                        ARDEN REALTY FINANCE IV, L.L.C.,

                      A DELAWARE LIMITED LIABILITY COMPANY,

                                  AS LANDLORD,

                                       AND

                         PATRIOT SCIENTIFIC CORPORATION,

                             A DELAWARE CORPORATION,

                                    AS TENANT

                           VIA FRONTERA BUSINESS PARK

                                   SUITE 10989

<PAGE>   2

<TABLE>
<CAPTION>
TABLE OF CONTENTS                                                          Page
-----------------                                                          ----
<S>                                                                        <C>
ARTICLE 1   BASIC LEASE PROVISIONS                                            1

ARTICLE 2   TERM/PREMISES                                                     2

ARTICLE 3   RENTAL                                                            2
       (a)  Basic Rental                                                      2
       (b)  Direct Costs                                                      2
       (c)  Definitions                                                       2
       (d)  Determination of Payment                                          4

ARTICLE 4   SECURITY DEPOSIT                                                  5

ARTICLE 5   HOLDING OVER                                                      7

ARTICLE 6   PERSONAL PROPERTY TAXES                                           8

ARTICLE 7   USE                                                               8

ARTICLE 8   CONDITION OF PREMISES                                             9

ARTICLE 9   REPAIRS AND ALTERATIONS                                           9

ARTICLE 10  LIENS                                                            10

ARTICLE 11  PROJECT SERVICES                                                 11

ARTICLE 12  RIGHTS OF LANDLORD                                               12

ARTICLE 13  INDEMNITY; EXEMPTION OF LANDLORD FROM LIABILITY                  12
       (a)  Indemnity                                                        12
       (b)  Exemption of Landlord from Liability                             12

ARTICLE 14  INSURANCE                                                        13
       (a)  Tenant's Insurance                                               13
       (b)  Form of Policies                                                 13
       (c)  Landlord's Insurance                                             14
       (d)  Waiver of Subrogation                                            14
       (e)  Compliance with Law                                              14

ARTICLE 15  ASSIGNMENT AND SUBLETTING                                        14

ARTICLE 16  DAMAGE OR DESTRUCTION                                            16

ARTICLE 17  SUBORDINATION                                                    17

ARTICLE 18  EMINENT DOMAIN                                                   18

ARTICLE 19  DEFAULT                                                          18
       (a)  Tenant's Default                                                 18
       (b)  Landlord's Default                                               19

ARTICLE 20  REMEDIES                                                         19

ARTICLE 21  TRANSFER OF LANDLORD'S INTEREST                                  20

ARTICLE 22  BROKER                                                           20

ARTICLE 23  PARKING                                                          21

ARTICLE 24  WAIVER                                                           21

ARTICLE 25  ESTOPPEL CERTIFICATE                                             22
</TABLE>

                                       -i-

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<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
ARTICLE 26  LIABILITY OF LANDLORD                                            22

ARTICLE 27  INABILITY TO PERFORM                                             22

ARTICLE 28  HAZARDOUS WASTE                                                  23

ARTICLE 29  SURRENDER OF PREMISES; REMOVAL OF PROPERTY                       24

    ARTICLE 30  MISCELLANEOUS                                                24
       (a)  Severability; Entire Agreement                                   24
       (b)  Attorneys' Fees; Waiver of Jury Trial                            25
       (c)  Time of Essence                                                  25
       (d)  Headings; Joint and Several                                      25
       (e)  Reserved Area                                                    25
       (f)  NO OPTION                                                        25
       (g)  Use of Project Name; Improvements                                25
       (h)  Rules and Regulations                                            25
       (i)  Quiet Possession                                                 25
       (j)  Rent                                                             26
       (k)  Successors and Assigns                                           26
       (l)  Notices                                                          26
       (m)  Intentionally Omitted                                            26
       (n)  Right of Landlord to Perform                                     26
       (o)  Access, Changes in Project, Facilities, Name                     26
       (p)  Signing Authority                                                26
       (q)  Intentionally Omitted                                            27
       (r)  Intentionally Omitted                                            27
       (s)  Survival of Obligations                                          27
       (t)  Intentionally Omitted                                            27
       (u)  Governing Law                                                    27
       (v)  Exhibits and Addendum                                            27

Exhibit "A" Premises
Exhibit "B" Rules and Regulations
Exhibit "C" Notice of Lease Term Dates and Tenant's Proportionate Share
Exhibit "D" Tenant Work Letter
Exhibit "E" Form of Resolutions
Exhibit "F" Form of Letter of Credit
</TABLE>

                                      -ii-

<PAGE>   4

                             INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERMS                                                           PAGE
-------------                                                           ----
<S>                                                                   <C>
Abatement Event                                                              11
Abatement Notice                                                             11
Additional Rent                                                               2
Adjustment Dates                                                              6
Alterations                                                                   9
Applicant                                                             Exhibit F
Approved Working Drawings                                             Exhibit D
Architect                                                             Exhibit D
Base, Shell and Core                                                  Exhibit D
Basic Rental                                                                  1
Beneficiary                                                           Exhibit F
Brokers                                                                       1
Claims                                                                       12
Code                                                                  Exhibit D
Commencement Date                                                             1
Construction Drawings                                                 Exhibit D
Contractor                                                            Exhibit D
Cosmetic Alterations                                                         10
Damage Repair Estimate                                                       16
Direct Costs                                                                  2
Eligibility Period                                                           11
Engineers                                                             Exhibit D
Environmental Laws                                                           23
Estimate                                                                      4
Estimate Statement                                                            4
Estimated Direct Costs                                                        4
Event of Default                                                             18
Existing Security Deposit                                                     5
Expiration Date                                                               1
Final Space Plan                                                      Exhibit D
Final Working Drawings                                                Exhibit D
Force Majeure                                                                22
Hazardous Material                                                           23
HVAC System                                                                  11
Improvement Allowance                                                 Exhibit D
Improvement Allowance Items                                           Exhibit D
Improvements                                                                  1
Landlord                                                                      1
Landlord Coordination Fee                                             Exhibit D
Lease                                                                         1
Lease Year                                                                    2
Letter of Credit                                                              6
 Operating Costs                                                              3
 Parking Passes                                                               1
Permits                                                               Exhibit D
 Permitted Use                                                                1
 Premises                                                                     1
 Project                                                                      1
 Real Property                                                                2
 Representative                                                              22
 Review Period                                                                5
 Security Deposit                                                             1
 Security Deposit Laws                                                        7
 Specifications                                                       Exhibit D
 Square Footage                                                               1
 Standard Improvement Package                                         Exhibit D
 Stated Amount                                                                6
 Statement                                                                    4
 Tax Costs                                                                    2
Tenant                                                                        1

</TABLE>

                                      -iii-

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<TABLE>
<CAPTION>
DEFINED TERMS                                                           Page
-------------                                                           ----
<S>                                                                   <C>
Tenant Improvements                                                           9
Tenant's Agents                                                       Exhibit C
Tenant's Proportionate Share                                                  1
Term                                                                          1
Transfer                                                                     15
Transfer Premium                                                             15
Transferee                                                                   15
</TABLE>

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<PAGE>   6

                     STANDARD MULTI-TENANT INDUSTRIAL LEASE

          This Standard Multi-Tenant Industrial Lease ("LEASE") is made and
entered into as of the 23rd day of February, 2001, by and between ARDEN REALTY
FINANCE IV, L.L.C., a Delaware limited liability company ("Landlord"), and
PATRIOT SCIENTIFIC CORPORATION, a Delaware corporation ("Tenant").

          Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the premises described as Suite No. 10989, as designated on the plan
attached hereto and incorporated herein as Exhibit "A" ("Premises"), of the
project ("Project") now known as Via Frontera Business Park whose address is
10989 Via Frontera, San Diego, California 92127 for the Term and upon the terms
and conditions hereinafter set forth, and Landlord and Tenant hereby agree as
follows:

                                    ARTICLE 1

                             BASIC LEASE PROVISIONS

A. TERM:                Five (5) years.
   COMMENCEMENT DATE:   August 1, 2001.
   EXPIRATION DATE:     July 31, 2006.
B. SQUARE FOOTAGE:      10,340 rentable square feet.
C. BASIC RENTAL:

<TABLE>
<CAPTION>
                    Annual         Monthly       Monthly Basic Rental
   Lease Year    Basic Rental    Basic Rental      Per Square Foot
   ----------    ------------    ------------    --------------------
<S>              <C>             <C>             <C>
       1         $117,876.00       $9,823.00            $ .95
       2         $124,080.00      $10,340.00            $1.00
       3         $130,284.00      $10,857.00            $1.05
       4         $136,488.00      $11,374.00            $1.10
       5         $142,692.00      $11,891.00            $1.15
</TABLE>

D. TENANT'S PROPORTIONATE SHARE:  13.27%, calculated as 10,340 rentable square
                                  feet in the Premises divided by 77,920
                                  rentable square feet in the Project.

E. SECURITY DEPOSIT:              A security deposit of $11,891.00 shall be paid
                                  by Tenant as indicated in Article 4 below. In
                                  addition, Tenant shall provide a Letter of
                                  Credit as indicated in Article 4 below.

F. PERMITTED USE:                 General office use consistent with the
                                  character of a first-class office building.

G. BROKERS:                       Foster and Company.

H. PARKING PASSES:                Tenant shall have the use of three (3)
                                  unreserved parking passes for     each 1,000
                                  square feet contained in the Premises, which
                                  equals thirty one (31) passes.

<PAGE>   7

                                    ARTICLE 2

                                  TERM/PREMISES

          The Term of this Lease shall commence on the Commencement Date as set
forth in Article 1 .A. of the Basic Lease Provisions and shall end on the
Expiration Date set forth in Article I.A. of the Basic Lease Provisions. For
purposes of this Lease, the term "Lease Year" shall mean each consecutive twelve
(12) month period during the Lease Term, with the first Lease Year commencing on
the Commencement Date. Landlord and Tenant hereby stipulate that the Premises
contains the number of square feet specified in Article 1.B. of the Basic Lease
Provisions. Landlord may deliver to Tenant a Commencement Letter in a form
substantially similar to that attached hereto as Exhibit "C", which Tenant shall
execute and return to Landlord within five (5) days of receipt thereof. Failure
of Tenant to timely execute and deliver the Commencement Letter shall constitute
an acknowledgment by Tenant that the statements included in such notice are true
and correct, without exception.

                                    ARTICLE 3

                                     RENTAL

          (a) Basic Rental. Tenant agrees to pay to Landlord during the Term
hereof, at Landlord's office or to such other person or at such other place as
directed from time to time by written notice to Tenant from Landlord, the
initial monthly and annual sums as set forth in Article 1 .C of the Basic Lease
Provisions, payable in advance on the first day of each calendar month, without
demand, setoff or deduction, except as otherwise expressly provided in this
Lease and in the event this Lease commences or the date of expiration of this
Lease occurs other than on the first day or last day of a calendar month, the
rent for such month shall be prorated. Notwithstanding the foregoing, the first
full month's rent shall be paid to Landlord in accordance with Article 1.1. of
the Basic Lease Provisions.

          (b) Direct Costs. Tenant shall pay an additional sum for such and each
subsequent calendar year equal to the product of the amount set forth in Article
1.D. of the Basic Lease Provisions multiplied by the amount of "Direct Costs."
In the event either the Premises and/or the Project is expanded or reduced, then
Tenant's Proportionate Share shall be appropriately adjusted, and as to the
calendar year in which such change occurs, Tenant's Proportionate Share for such
year shall be determined on the basis of the number of days during that
particular calendar year that such Tenant's Proportionate Share was in effect.
In the event this Lease shall terminate on any date other than the last day of a
calendar year, the additional sum payable hereunder by Tenant during the
calendar year in which this Lease terminates shall be prorated on the basis of
the relationship which the number of days which have elapsed from the
commencement of said calendar year to and including said date on which this
Lease terminates bears to three hundred sixty-five (365). Any and all amounts
due and payable by Tenant pursuant to this Lease (other than Basic Rental) shall
be deemed "ADDITIONAL RENT" and Landlord shall be entitled to exercise the same
rights and remedies upon default in these payments as Landlord is entitled to
exercise with respect to defaults in monthly Basic Rental payments.

          (c) Definitions. As used herein the term "DIRECT COSTS" shall mean the
sum of the following:

                    (i) "TAX COSTS", which shall mean any and all real estate
taxes and other similar charges on real property or improvements, assessments,
water and sewer charges, and all other charges assessed, reassessed or levied
upon the Project and appurtenances thereto and the parking or other facilities
thereof, or the real property thereunder (collectively the "REAL PROPERTY") or
attributable thereto or on the rents, issues, profits or income received or
derived therefrom which are assessed, reassessed or levied by the United States,
the State of California or any local government authority or agency or any
political subdivision thereof, and shall include Landlord's reasonable legal
fees, costs and disbursements incurred in connection with proceedings for
reduction of Tax Costs or any part thereof; provided, however, if at any time
after the date of this Lease the methods of taxation now prevailing shall be
altered so that in lieu of or as a supplement to or a substitute for the whole
or any part of any Tax Costs, there shall be

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assessed, reassessed or levied (a) a tax, assessment, reassessment, levy,
imposition or charge wholly or partially on the rents, or (b) a tax, assessment,
reassessment, levy (including but not limited to any municipal, state or federal
levy), imposition or charge measured by or based in whole or in part upon the
Real Property and imposed upon Landlord, or (c) a license fee measured by the
rent payable under this Lease, then all such taxes, assessments, reassessments
or levies or the part thereof so measured or based,. shall be deemed to be
included in the term "Direct Costs." Notwithstanding anything to the contrary
contained in this Section 3(c)(i), there shall be excluded from Tax Costs (A)
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 or receipts attributable to operations at the Project), (B) any
items included as Operating Costs, and (C) any items paid by Tenant under
Article 6 of this Lease.

                    (ii) "OPERATING COSTS", which shall mean all costs and
expenses incurred by Landlord in connection with the maintenance, operation,
replacement, ownership and repair of the Project, the equipment, the
intrabuilding network cable, adjacent walks, malls and landscaped and common
areas and the parking structure, areas and facilities of the Project, including,
but not limited to, salaries, wages, medical, surgical and general welfare
benefits and pension payments, payroll taxes, fringe benefits, employment taxes,
workers' compensation, uniforms and dry cleaning thereof for all persons who
perform duties connected with the operation, maintenance and repair of the
Project, its equipment, the intrabuilding network cable and the adjacent walks
and landscaped areas, including gardening, security, parking, operating
engineer, elevator, painting, plumbing, electrical, carpentry, window washing,
hired services, a reasonable allowance for depreciation of the cost of acquiring
or the rental expense of personal property used in the maintenance, operation
and repair of the Project, accountant's fees incurred in the preparation of rent
adjustment statements, legal fees, real estate tax consulting fees, personal
property taxes on property used in the maintenance and operation of the Project,
fees, costs, expenses or dues payable pursuant to the terms of any covenants,
conditions or restrictions or owners' association pertaining to the Project,
capital expenditures incurred to effect economies of operation and capital
expenditures required by government regulations, laws, or ordinances including,
but not limited to the American with Disabilities Act; costs incurred (capital
or otherwise) on a regular recurring basis every three (3) or more years for
certain maintenance projects (e.g., parking lot slurry coat); the cost of all
charges for electricity, gas and other utilities furnished to the common areas
of the Project only (except that water charges for the Project may be included
in Operating Costs), including any taxes thereon; the cost of all charges for
fire and extended coverage, liability and all other insurance for the Project
carried by Landlord; the cost of all supplies and materials; the cost of all
charges for cleaning, maintenance and service contracts and other services with
independent contractors and administration fees; a property management fee
(which fee may be imputed if Landlord has internalized management or otherwise
acts as its own property manager) and license, permit and inspection fees
relating to the Project. In the event, during any calendar year, the Project is
less than ninety-five percent (95%) occupied at all times, Operating Costs shall
be adjusted to reflect the Operating Costs of the Project as though ninety-five
percent (95%) were occupied at all times, and the increase or decrease in the
sums owed hereunder shall be based upon such Operating Costs as so adjusted.

          Notwithstanding anything above to the contrary, Operating Costs shall
not include (1) the cost of providing any service directly to and paid directly
by any tenant (outside of such tenant's Direct Cost payments); (2) the cost of
any items for which Landlord is reimbursed by insurance proceeds, condemnation
awards, a tenant of the Project, or otherwise to the extent so reimbursed; (3)
any real estate brokerage commissions or other costs incurred in procuring
tenants, or any fee in lieu of commission; (4) depreciation, amortization of
principal and interest on mortgages or ground lease payments (if any); (5) costs
of items considered capital repairs, replacements, improvements and equipment
under generally accepted accounting principles consistently applied except as
expressly included in Operating Costs pursuant to the definition above; (6)
costs incurred by Landlord due to the violation by Landlord or any tenant of the
terms and conditions of any lease of space in the Project or any law, code,
regulation, ordinance or the like; (7) Landlord's general corporate overhead and
general and administrative expenses; (8) any compensation paid to clerks,
attendants or other persons in commercial concessions operated by Landlord
(other than in the parking facility for the Project); (9) bad debt expenses and
interest, principal, points and fees on debts (except in connection with the
financing of items which may be included in Operating Costs) or amortization on
any ground lease, mortgage or mortgages or any other debt instrument encumbering
the Project (including the land on which the Project is

                                       -3-

<PAGE>   9

situated); (10) marketing costs, including leasing commissions, attorneys' fees
in connection with the negotiation and preparation of letters, deal memos,
letters of intent, leases, subleases and/or assignments, space planning costs,
and other costs and expenses incurred in connection with lease, sublease and/or
assignment negotiations and transactions with present or prospective tenants or
other occupants of the Project, including attorneys' fees and other costs and
expenditures incurred in connection with disputes with present or prospective
tenants or other occupants of the Project; (11) real estate brokers' leasing
commissions; (12) costs, including permit, license and inspection costs,
incurred with respect to the installation of other tenants' or occupants'
improvements made for tenants or other occupants in the Project or incurred in
renovating or otherwise improving, decorating, painting or redecorating vacant
space for tenants or other occupants in the Project; (13) any costs expressly
excluded from Operating Costs elsewhere in this Lease; (14) costs of any items
(including, but not limited to, costs incurred by Landlord for the repair of
damage to the Project) to the extent Landlord receives reimbursement from
insurance proceeds or from a third party (except that any deductible amount
under any insurance policy shall be included within Operating Costs); (15)
depreciation, amortization and interest payments, except as specifically
included in Operating Costs pursuant to the terms of this Lease and except on
materials, tools, supplies and vendor-type equipment purchased by Landlord to
enable Landlord to supply services Landlord might otherwise contract for with a
third party, where such depreciation, amortization and interest payments would
otherwise have been included in the charge for such third party's services, all
as determined in accordance with generally accepted accounting principles,
consistently applied, and when depreciation or amortization is permitted or
required, the item shall be amortized over its reasonably anticipated useful
life; (16) electric power costs or other utility costs for which any tenant
directly contracts with the local public service company (but Landlord shall
have the right to "gross up" as if such space was vacant); (17) costs incurred
in connection with the operation of retail stores selling merchandise and
restaurants in the Project to the extent such costs are in excess of the costs
Landlord reasonably estimates would have been incurred had such space been used
for general office use; (18) costs (including in connection therewith all
attorneys' fees and costs of settlement, judgments and/or payments in lieu
thereof arising from claims, disputes or potential disputes in connection with
potential or actual claims litigation or arbitrations pertaining to Landlord
and/or the Project, other than such claims or disputes respecting any services
or equipment used in the operation of the Building by Landlord; (19) costs
associated with the operation of the business of the partnership which
constitutes Landlord as the same are distinguished from the costs of operation
of the Project; (20) costs incurred in connection with the original construction
of the Project; or (21) costs of correcting defects in or inadequacy of the
initial design or construction of the Project.

          (d) Determination of Payment.

                    (i) Landlord shall give Tenant a yearly expense estimate
statement (the "ESTIMATE STATEMENT") which shall set forth Landlord's reasonable
estimate (the "ESTIMATE") of what the total amount of Direct Costs for the
then-current calendar year shall be (the "ESTIMATED DIRECT COSTS"). The failure
of Landlord to timely furnish the Estimate Statement for any calendar year shall
not preclude Landlord from enforcing its rights to collect any Estimated Direct
Costs under this Article 3. Tenant shall pay, with its next installment of
Monthly Basic Rental due, a fraction of the Estimated Direct Costs for the
then-current calendar year (reduced by any amounts paid pursuant to the last
sentence of this Section 3(d)(i)). Such fraction shall have as its numerator the
number of months which have elapsed in such current calendar 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 Basic Rental installments, an amount equal to
one-twelfth (1/12) of the total Estimated Direct Costs set forth in the previous
Estimate Statement delivered by Landlord to Tenant.

                    (ii) In addition, Landlord shall endeavor to give to Tenant
on or before the first day of April following the end of each calendar year, a
statement (the "STATEMENT") which shall state the Direct Costs incurred or
accrued for such preceding calendar year. Upon receipt of the Statement for each
calendar year during the Term, if amounts paid by Tenant as Estimated Direct
Costs are less than Tenant's actual Proportionate Share of Direct Costs as
specified on the Statement, Tenant shall pay, with its next installment of
Monthly Basic Rental due, the full amount of Tenant's actual Proportionate Share
of Direct Costs for such calendar year, less the amounts, if any, paid during
such calendar year as Estimated Direct Costs. If, however, the Statement
indicates that amounts paid by Tenant as Estimated Direct Costs are greater than
Tenant's actual Proportionate Share of Direct Costs as specified on the
Statement, such

                                       -4-

<PAGE>   10

overpayment shall be credited against Tenant's next installments of Estimated
Direct Costs. The failure of Landlord to timely furnish the Statement for any
calendar year shall not prejudice Landlord from enforcing its rights under this
Article 3. Even though the Term has expired and Tenant has vacated the Premises,
when the final determination is made of Tenant's Proportionate Share of the
Direct Costs for the calendar year in which this Lease terminates, Tenant shall
immediately pay to Landlord an amount as calculated pursuant to the provisions
of this Article 3(d). The provisions of this Section 3(d)(ii) shall survive the
expiration or earlier termination of the Term.

                    (iii) Within one hundred twenty (120) days after receipt of
a Statement by Tenant ("REVIEW PERIOD"), if Tenant disputes the amount set forth
in the Statement, Tenant's employees or an independent certified public
accountant (which accountant is a member of a nationally or regionally
recognized accounting firm and is hired on a non-contingency fee basis),
designated by Tenant, may, after reasonable notice to Landlord and at reasonable
times, inspect Landlord's records at Landlord's offices, provided that Tenant is
not then in default after expiration of all applicable cure periods of any
obligation under this Lease (including, but not limited to, the payment of the
amount in dispute) and provided further that Tenant and such accountant or
representative shall, and each of them shall use their commercially reasonable
efforts to cause their respective agents and employees to, maintain all
information contained in Landlord's records in strict confidence.
Notwithstanding the foregoing, Tenant shall only have the right to review
Landlord's records one (1) time during any twelve (12) month period. Tenant's
failure to dispute the amounts set forth in any Statement within the Review
Period shall be deemed to be Tenant's approval of such Statement and Tenant,
thereafter, waives the right or ability to dispute the amounts set forth in such
Statement. If after such inspection, but within thirty (30) days after the
Review Period, Tenant notifies Landlord in writing that Tenant still disputes
such amounts, a certification as to the proper amount shall be made in
accordance with Landlord's standard accounting practices, at Tenant's expense,
by an independent certified public accountant selected by Landlord and who is a
member of a nationally or regionally recognized accounting firm, which
certification shall be binding upon Landlord and Tenant. Landlord shall
cooperate in good faith with Tenant and the accountant to show Tenant and the
accountant the information upon which the certification is to be based. However,
if such certification by the accountant proves that the Direct Costs set forth
in the Statement were overstated by more than five percent (5%), then the cost
of the accountant and the cost of such certification shall be paid for by
Landlord. Promptly following the parties receipt of such certification, the
parties shall make such appropriate payments or reimbursements, as the case may
be, to each other, as are determined to be owing pursuant to such certification.
Tenant agrees that this section shall be the sole method to be used by Tenant to
dispute the amount of any Direct Costs payable by Tenant pursuant to the terms
of this Lease, and Tenant hereby waives any other rights at law or in equity
relating thereto.

                    (iv) If the Project is a part of a multi-building
development, those Direct Costs attributable to such development as a whole (and
not attributable solely to any individual building therein) shall be allocated
by Landlord to the Project and to the other buildings within such development on
an equitable basis.

                                    ARTICLE 4

                                SECURITY DEPOSIT

          (a) Cash Security Deposit. Tenant has previously deposited with
Landlord Eleven Thousand One Hundred Sixty-One and 20/100 Dollars ($11,161.20)
(the "EXISTING SECURITY DEPOSIT") in connection with Tenant's prior lease of the
Premises. Upon Tenant's execution of this Lease, Tenant shall deposit with
Landlord an additional Seven Hundred Twenty-Nine and 80/100 Dollars ($729.80),
which sum Landlord shall hold, together with the Existing Security Deposit, for
a total security deposit under this Lease of Eleven Thousand Eight Hundred
Ninety-One and 00/100 Dollars ($11,891.00)), which sum Landlord shall hold as
the Security Deposit hereunder. If Tenant breaches any provision of this Lease,
including but not limited to the payment of rent, Landlord may use all or any
part of this security deposit for the payment of any rent or any other sums in
default, or to compensate Landlord for any other loss or damage which Landlord
may suffer by reason of Tenant's default. If any portion of said deposit is so
used or applied, Tenant shall, within five (5) days after written demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
security deposit to its original amount. Tenant

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<PAGE>   11

agrees that Landlord shall not be required to keep the security deposit in
trust, segregate it or keep it separate from Landlord's general funds but
Landlord may commingle the security deposit with its general funds and Tenant
shall not be entitled to interest on such deposit. At the expiration of the
Lease Term, and provided there exists no default by Tenant hereunder, the
security deposit or any balance thereof shall be returned to Tenant (or, at
Landlord's option, to Tenant's assignee), provided that subsequent to the
expiration of this Lease, Landlord may retain from said security deposit (i) an
amount reasonably estimated by Landlord to cover potential Direct Cost
reconciliation payments due with respect to the calendar year in which this
Lease terminates or expires (such amount so retained shall not, in any event,
exceed ten percent (10%) of estimated Direct Cost payments due from Tenant for
such calendar year through the date of expiration or earlier termination of this
Lease and any amounts so retained and not applied to such reconciliation shall
be returned to Tenant within thirty (30) days after Landlord's delivery of the
Statement for such calendar year), (ii) any and all amounts reasonably estimated
by Landlord to cover the anticipated costs to be incurred by Landlord to remove
any signage provided to Tenant under this Lease and to repair any damage caused
by such removal (in which case any excess amount so retained by Landlord shall
be returned to Tenant within thirty (30) days after such removal and repair),
and (iii) any and all amounts permitted by law or this Article 4. Tenant hereby
waives the provisions of Section 1950.7 of the California Civil Code and all
other provisions of law, now or hereafter in effect, to the extent the same are
inconsistent with Landlord's right to claim those sums specified in this Article
4 above and/or those sums reasonably necessary to compensate Landlord for any
other loss or damage, foreseeable or unforeseeable, caused by the acts or
omissions of Tenant or any officer, employee, agent, contractor or invitee of
Tenant.

          (b) Letter of Credit. On or before August 1, 2001 (but in any event
prior to (i) Landlord's payment of the broker's commission for this Lease and
(ii) Landlord's disbursement of any portion of the Improvement Allowance),
Tenant shall deliver to Landlord an unconditional, irrevocable and renewable
letter of credit ("LETTER OF CREDIT") in favor of Landlord in the form attached
hereto as Exhibit F, issued by a bank reasonably satisfactory to Landlord with a
branch located in Southern California, in the principal amount ("STATED AMOUNT")
specified below, to be held by Landlord in accordance with the terms, provisions
and conditions of this Lease. Tenant shall pay all expenses, points and/or fees
incurred by Tenant in obtaining the Letter of Credit. The Stated Amount shall
initially be Sixty Thousand Dollars ($60,000.00); provided, however, that,
except as hereinafter provided, upon the dates specified below ("ADJUSTMENT
DATES"), the Stated Amount may be reduced to the following amounts:

<TABLE>
<CAPTION>
          Date                       Stated Amount
          ----                       -------------
<S>                                  <C>
          August 1, 2002             $48,000.00
          August 1, 2003             $36,000.00
          August 1, 2004             $24,000.00
          August 1, 2005             $12,000.00
</TABLE>

          However, if (i) a default by Tenant occurs under this Lease, or (ii)
circumstances exist that would, with notice or lapse of time, or both,
constitute a default by Tenant, and Tenant has failed to cure such default
within the time period permitted by Section 19 or such lesser time as may remain
before the relevant Adjustment Date as provided above, the Stated Amount shall
not thereafter be reduced unless and until such default shall have been fully
cured pursuant to the terms of this Lease, at which time the Stated Amount may
be reduced as hereinabove described. The Letter of Credit shall state that an
authorized officer or other representative of Landlord may make demand on
Landlord's behalf for the Stated Amount of the Letter of Credit, or any portion
thereof, 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. 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 issuing bank of the original Letter of Credit, the issuer or
confirming bank will reissue the Letter of Credit naming such transferee as the
beneficiary. Tenant shall be responsible for the payment to the issuing bank of
any transfer costs imposed by the issuing bank in connection with any such
transfer. If (A) the term of the Letter of Credit held by Landlord will expire
prior to the last day of the Lease Term and the Letter of Credit is not
extended, or a new Letter of Credit for an

                                       -6-

<PAGE>   12

extended period of time is not substituted, in either case at least (30) days
prior to the expiration of the Letter of Credit, or (B) Tenant commits a default
with respect to any provision of this Lease, including the filing of a voluntary
petition under Title 11 of the United States Code (i.e., the bankruptcy Code),
or otherwise becomes a debtor in any case or proceeding under the Bankruptcy
Code, as now existing or hereinafter amended, or any similar law or statute,
Landlord may (but shall not be required to) draw upon all or any portion of the
Stated Amount of the Letter of Credit, and the proceeds received from such draw
shall constitute Landlord's property (and not Tenant's property or the property
of the bankruptcy estate of Tenant) and Landlord may then use, apply or retain
all or any part of the proceeds (1) for the payment of any sum which is in
default, (2) to reimburse Landlord for the unamortized costs incurred by
Landlord in connection with this Lease (including, without limitation, any costs
incurred by Landlord to improve the Premises, any Improvement Allowance, and any
brokerage commissions and attorneys' fees), (3) for the payment of any other
amount which Landlord may spend or become obligated to spend by reason of
Tenant's default, (4) to compensate Landlord for any loss or damage which
Landlord may suffer by reason of Tenant's default or (5) as prepaid rent to be
applied against Tenant's Basic Rental obligations for the last month of the Term
and the immediately preceding month(s) of the Term until the remaining proceeds
are exhausted. If any portion of the Letter of Credit proceeds are so used or
applied, Tenant shall, within ten (10) days after demand therefor, post an
additional Letter of Credit in an amount to cause the aggregate amount of the
unused proceeds and such new Letter of Credit to equal the Stated Amount
required in this Article 4 above. Landlord shall not be required to keep any
proceeds from the Letter of Credit separate from its general funds. Should
Landlord sell its interest in the Premises during the Lease Term and if Landlord
deposits with the purchaser thereof the Letter of Credit 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 and Tenant
shall look solely to such transferee for the return of the Letter of Credit or
any proceeds therefrom. The Letter of Credit or any remaining proceeds of the
Letter of Credit held by Landlord after expiration of the Lease Term, after any
deductions described in this Article 4 above, shall be returned to Tenant or, at
Landlord's option, to the last assignee of Tenant's interest hereunder, within
sixty (60) days following the expiration of the Lease Term.

          The use, application or retention of the Letter of Credit, the
proceeds or any portion thereof, shall not prevent Landlord from exercising any
other rights or remedies provided under this Lease, it being intended that
Landlord shall not be required to proceed against the Letter of Credit and such
use, application or retention of the Letter of Credit shall not operate as a
limitation on any recovery to which Landlord may otherwise be entitled. No trust
relationship is created herein between Landlord and Tenant with respect to the
Letter of Credit.

          Landlord and Tenant acknowledge and agree that in no event or
circumstance shall the Letter of Credit, any renewal thereof or substitute
therefor or the proceeds thereof be (i) deemed to be or treated as a "security
deposit" within the meaning of California Civil Code Section 1950.7, (ii)
subject to the terms of such Section 1950.7, or (iii) intended to serve as a
"security deposit" within the meaning of such Section 1950.7. The parties hereto
(A) recite that the Letter of Credit is not intended to serve as a security
deposit and such Section 1950.7 and any and all other laws, rules and
regulations applicable to security deposits in the commercial context ("SECURITY
DEPOSIT LAWS") shall have no applicability or relevancy thereto and (B) waive
any and all rights, duties and obligations either party may now or, in the
future, will have relating to or arising from the Security Deposit Laws.

                                    ARTICLE 5

                                  HOLDING OVER

          Should Tenant, without Landlord's written consent, hold over after
termination of this Lease, Tenant shall become a tenant from month to month,
only upon each and all of the terms herein provided as may be applicable to a
month to month tenancy and any such holding over shall not constitute an
extension of this Lease. During such holding over, Tenant shall pay in advance,
monthly, Basic Rental at one hundred fifty percent (150%) of the rate in effect
for the last month of the Term of this Lease, in addition to, and not in lieu
of, all other payments required to be made by Tenant hereunder including but not
limited to Tenant's Proportionate Share of any increase in Direct Costs. Nothing
contained in this Article 5 shall be construed as consent by Landlord to any
holding over of the Premises by Tenant, and Landlord expressly

                                       -7-

<PAGE>   13

reserves the right to require Tenant to surrender possession of the Premises to
Landlord as provided in this Lease upon the expiration or earlier termination of
the Term. If Landlord provides Tenant with at least thirty (30) days prior
written notice that Landlord has a signed proposal or lease from a succeeding
tenant to lease the Premises, and if Tenant fails to surrender the Premises upon
the later of (i) the date of expiration of such thirty (30) day period, or (ii)
the date of expiration or termination of this Lease, Tenant agrees to indemnify,
defend and hold Landlord harmless from all costs, loss, expense or liability,
including without limitation, claims made by any succeeding tenant and real
estate brokers claims and attorney's fees and costs.

                                    ARTICLE 6

                             PERSONAL PROPERTY TAXES

          Tenant shall pay, prior to delinquency, all taxes assessed against or
levied upon trade fixtures, furnishings, equipment and all other personal
property of Tenant located in the Premises. In the event any or all of Tenant's
trade fixtures, furnishings, equipment and other personal property shall be
assessed and taxed with property of Landlord, or if the cost or value of any
leasehold improvements in the Premises exceeds the cost or value of a
Project-standard buildout as determined by Landlord and, as a result, real
property taxes for the Project are increased, Tenant shall pay to Landlord its
share of such taxes within ten (10) days after delivery to Tenant by Landlord of
a statement in writing setting forth the amount of such taxes applicable to
Tenant's property or above-standard improvements. Tenant shall assume and pay to
Landlord at the time of paying Basic Rental any excise, sales, use, rent,
occupancy, garage, parking, gross receipts or other taxes (other than net income
taxes) which may be imposed on or on account of letting of the Premises or the
payment of Basic Rental or any other sums due or payable hereunder, and which
Landlord may be required to pay or collect under any law now in effect or
hereafter enacted. Tenant shall pay directly to the party or entity entitled
thereto all business license fees, gross receipts taxes and similar taxes and
impositions which may from time to time be assessed against or levied upon
Tenant, as and when the same become due and before delinquency. Notwithstanding
anything to the contrary contained herein, any sums payable by Tenant under this
Article 6 shall not be included in the computation of "Tax Costs."

                                    ARTICLE 7

                                       USE

          Tenant shall use and occupy the Premises only for the use set forth in
Article 1 .F. of the Basic Lease Provisions and shall not use or occupy the
Premises or permit the same to be used or occupied for any other purpose without
the prior written consent of Landlord, which consent may be given or withheld in
Landlord's sole and absolute discretion, and Tenant agrees that it will use the
Premises in such a manner so as not to interfere with or infringe the rights of
other tenants in the Project. Tenant shall, at its sole cost and expense,
promptly comply with all laws, statutes, ordinances and governmental regulations
or requirements now in force or which may hereafter be in force relating to or
affecting (i) the condition, use or occupancy of the Premises or the Project
excluding structural changes to the Project not related to Tenant's particular
use of the Premises, and (ii) improvements installed or constructed in the
Premises by or for the benefit of Tenant. Tenant shall not do or permit to be
done anything which would invalidate or increase the cost of any fire and
extended coverage insurance policy covering the Project and/or the property
located therein and Tenant shall comply with all rules, orders, regulations and
requirements of any organization which sets out standards, requirements or
recommendations commonly referred to by major fire insurance underwriters.
Tenant shall promptly upon demand reimburse Landlord for any additional premium
charges for any such insurance policy assessed or increased by reason of
Tenant's failure to comply with the provisions of this Article. Tenant agrees
not to keep any trash, garbage, waste or other refuse on the Premises except in
sanitary containers and agrees to regularly and frequently remove same from the
Premises. Tenant shall keep all containers or other equipment used for storage
of such materials in a clean and sanitary condition. Tenant shall keep the
sewage disposal system free of all obstructions and in good operating condition.
If the volume of Tenant's trash becomes excessive in Landlord's judgment,
Landlord shall have the right to charge Tenant for additional trash disposal
services and/or to require that Tenant contract directly for additional trash
disposal services at Tenant's sole cost and expense. Tenant shall, at its own
cost, retain a licensed, bonded professional pest and

                                       -8-

<PAGE>   14

sanitation control service to perform inspections of the Premises not less
frequently than once every thirty (30) days for the purpose of eliminating
infestation by and controlling the presence of insects, rodents and vermin and
shall promptly cause any corrective or extermination work recommended by such
service to be performed. Such work shall be performed pursuant to a written
contract, a copy of which shall be delivered to Landlord by Tenant upon request.

                                    ARTICLE 8

                              CONDITION OF PREMISES

          The Premises shall be initially improved as provided in, and subject
to, the Tenant Work Letter attached hereto as Exhibit "D" and made a part
hereof. The existing leasehold improvements in the Premises as of the date of
this Lease, together with the Improvements (as defined in the Tenant Work
Letter) may be collectively referred to herein as the "TENANT IMPROVEMENTS." The
taking of possession of the Premises by Tenant shall conclusively establish that
the Premises and the Project were at such time in satisfactory condition. Tenant
hereby waives subsection 1 of Section 1932 and Sections 1941 and 1942 of the
Civil Code of California or any successor provision of law.

          Landlord reserves the right from time to time, but subject to payment
by and/or reimbursement from Tenant as otherwise provided herein: (i) to
install, use, maintain, repair, replace and relocate for service to the Premises
and/or other parts of the Project pipes, ducts, conduits, wires, appurtenant
fixtures, and mechanical systems, wherever located in the Premises or the
Project, (ii) to alter, close or relocate any facility in the Premises or the
Common Areas or otherwise conduct any of the above activities for the purpose of
complying with a general plan for fire/life safety for the Project or otherwise
and (iii) to comply with any federal, state or local law, rule or order with
respect thereto or the regulation thereof not currently in effect. Landlord
shall attempt to perform any such work with the least inconvenience to Tenant as
possible, but in no event shall Tenant be permitted to withhold or reduce Basic
Rental or other charges due hereunder as a result of same, make any claim for
constructive eviction or otherwise make claim against Landlord for interruption
or interference with Tenant's business and/or operations.

                                    ARTICLE 9

                             REPAIRS AND ALTERATIONS

          Landlord shall maintain the structural portions of the Project
including the foundation, floor/ceiling slabs, roof, curtain wall, exterior
glass, columns, beams, shafts, stairs, stairwells and common areas. Except as
expressly provided as Landlord's obligation in this Article 9, Tenant shall keep
the Premises and all systems therein in good condition and repair. All damage or
injury to the Premises or the Project resulting from the act or negligence of
Tenant, its employees, agents or visitors, guests, invitees or licensees or by
the use of the Premises shall be promptly repaired by Tenant, at its sole cost
and expense, to the satisfaction of Landlord; provided, however, that for damage
to the Project as a result of casualty or for any repairs that may impact the
mechanical, electrical, plumbing, heating, ventilation or air-conditioning
systems of the Project, Landlord shall have the right (but not the obligation)
to select the contractor. Landlord may make any repairs which are not promptly
made by Tenant after Tenant's receipt of written notice and the reasonable
opportunity of Tenant to make said repair within five (5) business days from
receipt of said written notice, and charge Tenant for the cost thereof, which
cost shall be paid by Tenant, as additional rent, within five (5) days from
invoice from Landlord. Tenant shall be responsible for the design and function
of all improvements in the Premises, whether or not installed by Landlord at
Tenant's request. Tenant waives all rights to make repairs at the expense of
Landlord, or to deduct the cost thereof from the rent. Tenant shall make no
alterations, changes or additions in or to the Premises (collectively,
"Alterations") without Landlord's prior written consent, and then only by
contractors approved by Landlord in writing and upon the approval by Landlord in
writing of fully detailed and dimensioned plans and specifications pertaining to
the Alterations in question, to be prepared and submitted by Tenant at its sole
cost and expense. Tenant shall at its sole cost and expense obtain all necessary
approvals and permits pertaining to any Alterations approved by Landlord. Tenant
shall construct such Alterations in a good and workmanlike manner, in
conformance with all applicable federal, state, county and municipal laws, rules
and regulations, pursuant to a valid

                                       -9-

<PAGE>   15

building permit, and in conformance with Landlord's construction rules and
regulations. If Landlord, in approving any Alterations, specifies a commencement
date therefor, Tenant shall not commence any work with respect to such
Alterations prior to such date. Notwithstanding anything to the contrary
contained herein, Tenant may make strictly cosmetic changes to the finish work
in the Premises (the "COSMETIC ALTERATIONS") without Landlord's consent,
provided that the aggregate cost of any such alterations does not exceed
$25,000.00 in any twelve (12) month period, and further provided that such
alterations do not (i) require any structural or other substantial modifications
to the Premises, (ii) require any changes to, nor adversely affect, the systems
and equipment of the Project, and (iii) affect the exterior appearance of the
Project. Tenant shall give Landlord at least fifteen (15) days prior notice of
such Cosmetic Alterations, which notice shall be accompanied by reasonably
adequate evidence that such changes meet the criteria contained in this Article
9. Tenant hereby indemnifies, defends and agrees to hold Landlord free and
harmless from all liens and claims of lien, and all other liability, claims and
demands arising out of any work done or material supplied to the Premises by or
at the request of Tenant in connection with any Alterations. Prior to the
commencement of any Alterations, Tenant shall provide Landlord with evidence
that Tenant carries "Builder's All Risk" insurance in an amount approved by
Landlord covering the construction of such Alterations, and such other insurance
as Landlord may reasonably require, it being understood that all such
Alterations shall be insured by Tenant pursuant to Article 14 of this Lease
immediately upon completion thereof. In addition, Landlord may, in its
discretion, require Tenant to obtain a lien and completion bond or some
alternate form of security satisfactory to Landlord in an amount sufficient to
ensure the lien free completion of such Alterations and naming Landlord as a
co-obligee. If permitted Alterations are made, they shall be made at Tenant's
sole cost and expense and shall be and become the property of Landlord, except
that Landlord may, by written notice to Tenant given at least thirty (30) days
prior to the end of the Term, require Tenant at Tenant's expense to remove any
Alterations installed by Tenant, and to repair any damages to the Premises
caused by such removal. Any and all costs attributable to or related to the
applicable building codes of the city in which the Project is located (or any
other authority having jurisdiction over the Project) arising from Tenants
plans, specifications, improvements, alterations or otherwise shall be paid by
Tenant at its sole cost and expense. With regard to repairs, Alterations or any
other work arising from or related to this Article 9, Landlord shall be entitled
to receive an administrative/supervision fee (which fee shall vary depending
upon whether or not Tenant orders the work directly from Landlord) sufficient to
compensate Landlord for all overhead, general conditions, fees and other costs
and expenses arising from Landlord's involvement with such work. The
construction of initial improvements to the Premises shall be governed by the
terms of the Tenant Work Letter and not the terms of this Article 9.

                                   ARTICLE 10

                                      LIENS

          Tenant shall keep the Premises and the Project free from any
mechanics' liens, vendors liens or any other liens arising out of any work
performed, materials furnished or obligations incurred by Tenant, and agrees to
defend, indemnify and hold harmless Landlord from and against any such lien or
claim or action thereon, together with costs of suit and reasonable attorneys'
fees and costs incurred by Landlord in connection with any such claim or action.
Before commencing any work of alteration, addition or improvement to the
Premises, Tenant shall give Landlord at least ten (10) business days' written
notice of the proposed commencement of such work (to afford Landlord an
opportunity to post appropriate notices of non-responsibility). In the event
that there shall be recorded against the Premises or the Project or the property
of which the Premises is a part any claim or lien arising out of any such work
performed, materials furnished or obligations incurred by Tenant and such claim
or lien shall not be removed or discharged within ten (10) days of filing,
Landlord shall have the right but not the obligation to pay and discharge said
lien without regard to whether such lien shall be lawful or correct or to
require that Tenant deposit with Landlord in cash, lawful money of the United
States, one hundred fifty percent (150%) of the amount of such claim, which sum
may be retained by Landlord until such claim shall have been removed of record
or until judgment shall have been rendered on such claim and such judgment shall
have become final, at which time Landlord shall have the right to apply such
deposit in discharge of the judgment on said claim and any costs, including
attorneys' fees and costs incurred by Landlord, and shall remit the balance
thereof to Tenant.

                                      -10-

<PAGE>   16

                                   ARTICLE 11

                                PROJECT SERVICES

          (a) Landlord shall provide the existing equipment servicing the
Premises in its "as is" condition in order to provide electric current, heat and
air-conditioning therein. Landlord and Tenant hereby acknowledge that an
independent heating, ventilation and air-conditioning system ("HVAC SYSTEM")
will service the Premises. Tenant shall be responsible for the maintenance and
repair of the HVAC System and shall, at Tenant's sole cost and expense, maintain
a service and maintenance contract for such HVAC System with a contractor
reasonably approved by Landlord, which contractor shall perform all maintenance
and repairs on the HVAC System as reasonably determined by Landlord to be
necessary. The electricity furnished to the Premises shall be separately
metered, at Tenant's sole cost, and Tenant shall contract with, and make
payments directly to, the entity providing such electricity. Tenant shall be
responsible for retaining a bonded janitorial contractor, which contractor shall
be reasonably approved by Landlord, and Tenant hereby acknowledges that Landlord
shall have no obligation whatsoever to provide janitorial service to the
Premises. Tenant shall comply with all rules and regulations which Landlord may
reasonably establish for the proper functioning and protection of any common
systems of the Project. Except as provided in Section 11(c) below, Landlord
shall not be liable for, and there shall be no rent abatement as a result of,
any stoppage, reduction or interruption of any such services caused by
governmental rules, regulations or ordinances, riot, strike, labor disputes,
breakdowns, accidents, necessary repairs or other cause. Except as specifically
provided in this Article 11, Tenant agrees to pay for all utilities and other
services utilized by Tenant and additional building services furnished to Tenant
not uniformly furnished to all tenants of the Project at the rate generally
charged by Landlord to tenants of the Project.

          (b) If any lights, machines or equipment (including but not limited to
computers) are used by Tenant in the Premises which materially affect the
temperature otherwise maintained by the air conditioning system, or generate
substantially more heat in the Premises than may be accommodated by the system,
Tenant shall be responsible for installing, at Tenant's sole cost and expense,
any machinery and equipment reasonably necessary to restore temperature balance,
including but not limited to modifications to the standard air conditioning
equipment. Landlord shall not be liable under any circumstances for loss of or
injury to property or injury to, or interference with, Tenant's business
(including, but not limited to, loss of profits), however occurring, through or
in connection with or incidental to failure to furnish any of the services or
utilities specified in this Article 11.

          (c) An "ABATEMENT EVENT" shall be defined as an event that prevents
Tenant from using the Premises or any portion thereof, as a result of any
failure to provide services or access to the Premises, where (i) Tenant does not
actually use the Premises or such portion thereof, and (ii) such event is not
caused by the negligence or willful misconduct of Tenant, its agents, employees
or contractors. Tenant shall give Landlord notice ("ABATEMENT NOTICE") of any
such Abatement Event, and if such Abatement Event continues beyond the
"Eligibility Period" (as that term is defined below), then the Basic Rental and
Tenant's Proportionate Share of Direct Costs shall be abated entirely or
reduced, as the case may be, after 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 is prevented from using, 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 Basic Rental and Tenant's Proportionate
Share of Direct Costs for the entire Premises shall be abated entirely 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 Basic Rental and Tenant's Proportionate Share of Direct 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. The term "ELIGIBILITY PERIOD" shall mean a period of
five (5) consecutive business days after Landlord's receipt of any Abatement
Notice(s). Such right to abate Basic Rental and Tenant's Proportionate

                                      -11-

<PAGE>   17

Share of Direct Costs shall be Tenant's sole and exclusive remedy at law or in
equity for an Abatement Event.

                                   ARTICLE 12

                               RIGHTS OF LANDLORD

          Landlord and its agents shall have the right to enter the Premises at
all reasonable times upon twenty-four (24) hours prior notice (except in the
case of an emergency) for the purpose of examining or inspecting the same,
serving or posting and keeping posted thereon notices as provided by law, or
which Landlord deems necessary for the protection of Landlord or the Premises,
showing the same to prospective tenants, lenders or purchasers of the Project,
and for making such alterations, repairs, improvements or additions to the
Premises or to the Project as Landlord may deem necessary or desirable. If
Tenant shall not be personally present to open and permit an entry into the
Premises at any time when such an entry by Landlord is necessary or permitted
hereunder, Landlord may enter by means of a master key or may enter forcibly,
only in the case of an emergency, without liability to Tenant and without
affecting this Lease.

                                   ARTICLE 13

                 INDEMNITY: EXEMPTION OF LANDLORD FROM LIABILITY

          (a) Indemnity. Tenant shall indemnify, defend and hold Landlord
harmless from any and all claims arising from Tenant's use of the Premises or
the Project (including, without limitation, Tenant's signage) or from the
conduct of its business or from any activity, work or thing which may be
permitted or suffered by Tenant in or about the Premises or the Project and
shall further indemnify, defend and hold Landlord harmless from and against any
and all claims arising from any breach or default in the performance of any
obligation on Tenant's part to be performed under this Lease or arising from any
negligence or willful misconduct of Tenant or any of its agents, contractors,
employees or invitees, patrons, customers or members in or about the Project and
from any and all costs, attorneys' fees and costs, expenses and liabilities
incurred in the defense of any claim or any action or proceeding brought
thereon, including negotiations in connection therewith. However,
notwithstanding the foregoing, Tenant shall not be required to indemnify and/or
hold Landlord harmless from any loss, cost, liability, damage or expense,
including, but not limited to, penalties, fines, attorneys' fees or costs
(collectively, "Claims"), to any person, property or entity to the extent
resulting from the negligence or willful misconduct of Landlord or its agents,
contractors, or employees (except for damage to the Improvements and Tenant's
personal property, fixtures, furniture and equipment in the Premises in which
case Tenant shall be responsible to the extent Tenant is required to obtain the
requisite insurance coverage pursuant to this Lease). Landlord hereby
indemnifies Tenant and holds Tenant harmless from any Claims to the extent
resulting from the negligence or willful misconduct of Landlord or its agents,
contractors or employees; provided, however, that because Landlord maintains
insurance on the Project and Tenant compensates Landlord for such insurance as
part of Tenant's Proportionate Share of Direct Costs and because of the
existence of waivers of subrogation set forth in Article 14 of this Lease,
Landlord hereby indemnifies and holds Tenant harmless from any Claims to any
property outside of the Premises to the extent such Claim is covered by such
insurance, even if resulting from the negligent acts, omissions, or willful
misconduct of Tenant or those of its agents, contractors, or employees.
Similarly, since Tenant must carry insurance pursuant to Article 14 to cover its
personal property within the Premises and the Improvements, Tenant hereby
indemnifies and holds Landlord harmless from any Claim to any property within
the Premises, to the extent such Claim is covered by such insurance, even if
resulting from the negligent acts, omissions or willful misconduct of Landlord
or those of its agents, contractors, or employees. Tenant hereby assumes all
risk of damage to property or injury to persons in or about the Premises from
any cause, and Tenant hereby waives all claims in respect thereof against
Landlord, excepting where the damage is caused solely by the gross negligence or
willful misconduct of Landlord.

          (b) Exemption of Landlord from Liability. Landlord shall not be liable
for injury to Tenant's business, or loss of income therefrom, or, except in
connection with damage or injury resulting from the gross negligence or willful
misconduct of Landlord, or its authorized agents, for damage that may be
sustained by the person, goods, wares, merchandise or property of

                                      -12-

<PAGE>   18

Tenant, its employees, invitees, customers, agents, or contractors, or any other
person in, on or about the Premises directly or indirectly caused by or
resulting from fire, steam, electricity, gas, water, or rain which may leak or
flow from or into any part of the Premises, or from the breakage, leakage,
obstruction or other defects of the pipes, sprinklers, wires, appliances,
plumbing, air conditioning, light fixtures, or mechanical or electrical systems
or from intrabuilding network cable, whether such damage or injury results from
conditions arising upon the Premises or upon other portions of the Project or
from other sources or places and regardless of whether the cause of such damage
or injury or the means or repairing the same is inaccessible to Tenant, except
in connection with damage or injury resulting from the gross negligence or
willful misconduct of Landlord, or its authorized agents. Landlord shall not be
liable to Tenant for any damages arising from any act or neglect of any other
tenant of the building.

          Landlord shall not be liable for losses due to theft, vandalism, or
like causes.

                                   ARTICLE 14

                                    INSURANCE

          (a) Tenant's Insurance. Tenant, shall at all times during the Term of
this Lease, and at its own cost and expense, procure and continue in force the
following insurance coverage: (i) Commercial General Liability Insurance with a
combined single limit for bodily injury and property damages of not less than
Two Million Dollars ($2,000,000) per occurrence and Three Million Dollars
($3,000,000) in the annual aggregate, including products liability coverage if
applicable, covering the insuring provisions of this Lease and the performance
of Tenant of the indemnity and exemption of Landlord from liability agreements
set forth in Article 13 hereof; (ii) a policy of standard fire, extended
coverage and special extended coverage insurance (all risks), including a
vandalism and malicious mischief endorsement, sprinkler leakage coverage and
earthquake sprinkler leakage where sprinklers are provided in an amount equal to
the full replacement value new without deduction for depreciation of all (A)
Tenant Improvements, Alterations, fixtures and other improvements in the
Premises and (B) trade fixtures, furniture, equipment and other personal
property installed by or at the expense of Tenant; (iii) Worker's Compensation
coverage as required by law; and (iv) business interruption, loss of income and
extra expense insurance covering failure of Tenant's telecommunications
equipment and covering all other perils, failures or interruptions. Tenant shall
carry and maintain during the entire Lease Term (including any option periods,
if applicable), at Tenant's sole cost and expense, increased amounts of the
insurance required to be carried by Tenant pursuant to this Article 14 and such
other reasonable types of insurance coverage and in such reasonable amounts
covering the Premises and Tenant's operations therein, as may be reasonably
required by Landlord, so long as such increased amounts and/or other types of
insurance coverage are then generally required by comparable landlords of
comparable first-class, institutional quality office buildings in the vicinity
of the Project.

          (b) Form of Policies. The aforementioned minimum limits of policies
and Tenant's procurement and maintenance thereof shall in no event limit the
liability of Tenant hereunder. The Commercial General Liability Insurance policy
shall name Landlord, Landlord's property manager, Landlord's lender(s) and such
other persons or firms as Landlord specifies from time to time, as additional
insureds' with an appropriate endorsement to the policy(s). All such insurance
policies carried by Tenant shall be with companies having a rating of not less
than A-VIII in Best's Insurance Guide. Tenant shall furnish to Landlord, from
the insurance companies, or cause the insurance companies to furnish,
certificates of coverage. No such policy shall be cancelable or subject to
reduction of coverage or cancellation except after thirty (30) days prior
written notice to Landlord by the insurer. All such policies shall be endorsed
to agree that Tenant's policy is primary as to Claims arising within the
Premises and that any insurance carried by Landlord is excess and not
contributing with any Tenant insurance requirement hereunder. Tenant shall, at
least twenty (20) days prior to the expiration of such policies, furnish
Landlord with renewals or binders. Tenant agrees that if Tenant does not take
out and maintain such insurance or furnish Landlord with renewals or binders,
Landlord may (but shall not be required to), upon prior notice to Tenant and the
expiration of a five (5) day cure period, procure said insurance on Tenant's
behalf and charge Tenant the cost thereof, which amount shall be payable by
Tenant upon demand with interest (at the rate set forth in Section 20(e) below)
from the date such sums are expended. Tenant shall have the right to provide
such insurance coverage

                                      -13-

<PAGE>   19

pursuant to blanket policies obtained by Tenant, provided such blanket policies
expressly afford coverage to the Premises and to Tenant as required by this
Lease.

          (c) Landlord's Insurance. Landlord shall, as a cost to be included in
Operating Costs, procure and maintain at all times during the Term of this
Lease, a policy or policies of insurance covering loss or damage to the Project
in the amount of the full replacement costs without deduction for depreciation
thereof (exclusive of Tenant's trade fixtures, inventory, personal property and
equipment), providing protection against all perils included within the
classification of fire and extended coverage, vandalism coverage and malicious
mischief, sprinkler leakage, water damage, and special extended coverage on
building. Additionally, Landlord may (but shall not be required to) carry: (i)
Bodily Injury and Property Damage Liability Insurance and/or Excess Liability
Coverage Insurance; and (ii) Earthquake and/or Flood Damage Insurance; and (iii)
Rental Income Insurance at its election or if required by its lender from time
to time during the Term hereof, in such amounts and with such limits as Landlord
or its lender may deem appropriate. The costs of such insurance shall be
included in Operating Costs.

          (d) Waiver of Subrogation. Landlord and Tenant each agree to have
their respective insurers issuing the insurance described in Sections 14(a)(ii),
14(a)(iv) and the first sentence of Section 14(c) waive any rights of
subrogation that such companies may have against the other party. Tenant hereby
waives any right that Tenant may have against Landlord and Landlord hereby
waives any right that Landlord may have against Tenant as a result of any loss
or damage to the extent such loss or damage is insurable under such policies.

          (e) Compliance with Law. Tenant agrees that it will not, at any time,
during the Term of this Lease, carry any stock of goods or do anything in or
about the Premises that will in any way tend to increase the insurance rates
upon the Project. Tenant agrees to pay Landlord forthwith upon demand the amount
of any increase in premiums for insurance against loss by fire that may be
charged during the Term of this Lease on the amount of insurance to be carried
by Landlord on the Project resulting from the foregoing, or from Tenant doing
any act in or about said Premises that does so increase the insurance rates,
whether or not Landlord shall have consented to such act on the part of Tenant.
If Tenant installs upon the Premises any electrical equipment which constitutes
an overload of electrical lines of the Premises, Tenant shall at its own cost
and expense in accordance with all other Lease provisions, and subject to the
provisions of Article 9, 10 and 11, hereof, make whatever changes are necessary
to comply with requirements of the insurance underwriters and any governmental
authority having jurisdiction thereover, but nothing herein contained shall be
deemed to constitute Landlord's consent to such overloading. Tenant shall, at
its own expense, comply with all requirements of the insurance authority having
jurisdiction over the Project necessary for the maintenance of reasonable fire
and extended coverage insurance for the Premises, including without limitation
thereto, the installation of fire extinguishers or an automatic dry chemical
extinguishing system.

                                   ARTICLE 15

                            ASSIGNMENT AND SUBLETTING

          Tenant shall have no power to, either voluntarily, involuntarily, by
operation of law or otherwise, sell, assign, transfer or hypothecate this Lease,
or sublet the Premises or any part thereof, or permit the Premises or any part
thereof to be used or occupied by anyone other than Tenant or Tenant's employees
without the prior written consent of Landlord which shall not be unreasonably
withheld. If Tenant is a corporation, unincorporated association, partnership or
limited liability company, the sale, assignment, transfer or hypothecation of
any class of stock or other ownership interest in such corporation, association,
partnership or limited liability company in excess of twenty-five percent (25%)
in the aggregate shall be deemed an assignment within the meaning and provisions
of this Article 15. Tenant may transfer its interest pursuant to this Lease only
upon the following express conditions, which conditions are agreed by Landlord
and Tenant to be reasonable:

          (a) That the proposed transferee shall be subject to the prior written
consent of Landlord, which consent will not be unreasonably withheld but,
without limiting the generality of the foregoing, it shall be reasonable for
Landlord to deny such consent if:

                                      -14-

<PAGE>   20

                    (i) The use to be made of the Premises by the proposed
transferee is (a) not generally consistent with the character and nature of all
other tenancies in the Project, (b) a use which conflicts with any so-called
"exclusive" then in favor of, or for any use which is the same as that stated in
any percentage rent lease to, another tenant of the Project or any other
buildings in the same complex as the Project, or (c) a use which would be
prohibited by any other portion of this Lease (including but not limited to any
Rules and Regulations then in effect);

                    (ii) The financial responsibility of the proposed transferee
is not reasonably satisfactory to Landlord;

                    (iii) The proposed transferee is either a governmental
agency or instrumentality thereof; or

                    (iv) Either the proposed transferee or any person or entity
which directly or indirectly controls, is controlled by or is under common
control with the proposed transferee is negotiating with Landlord or has
negotiated with Landlord to lease space in the Project.

          (b) Whether or not Landlord consents to any such transfer, Tenant
shall pay to Landlord Landlord's then standard processing fee and reasonable
attorneys' fees and costs incurred in connection with the proposed transfer up
to the aggregate sum of $1,500.00;

          (c) That the proposed transferee shall execute an agreement pursuant
to which it shall agree to perform faithfully and be bound by all of the terms,
covenants, conditions, provisions and agreements of this Lease applicable to
that portion of the Premises so transferred; and

          (d) That an executed duplicate original of said assignment and
assumption agreement or other transfer on a form reasonably approved by
Landlord, shall be delivered to Landlord within five (5) days after the
execution thereof, and that such transfer shall not be binding upon Landlord
until the delivery thereof to Landlord and the execution and delivery of
Landlord's consent thereto. It shall be a condition to Landlord's consent to any
subleasing, assignment or other transfer of part or all of Tenant's interest in
the Premises (hereinafter referred to as a "TRANSFER") that (i) upon Landlord's
consent to any Transfer, Tenant shall pay and continue to pay fifty percent
(50%) of any "Transfer Premium" (defined below), received by Tenant from the
transferee; (ii) any sublessee of part or all of Tenant's interest in the
Premises shall agree that in the event Landlord gives such sublessee notice that
Tenant is in default under this Lease, such sublessee shall thereafter make all
sublease or other payments directly to Landlord, which will be received by
Landlord without any liability whether to honor the sublease or otherwise
(except to credit such payments against sums due under this Lease), and any
sublessee shall agree to attorn to Landlord or its successors and assigns at
their request should this Lease be terminated for any reason, except that in no
event shall Landlord or its successors or assigns be obligated to accept such
attornment; (iii) any such Transfer and consent shall be effected on forms
supplied by Landlord and/or its legal counsel; (iv) Landlord may require that
Tenant not then be in default hereunder in any respect; and (v) Tenant or the
proposed subtenant or assignee (collectively, "TRANSFEREE") shall agree to pay
Landlord, upon demand, as additional rent, a sum equal to the additional costs,
if any, incurred by Landlord for maintenance and repair as a result of any
change in the nature of occupancy caused by such subletting or assignment.
"TRANSFER PREMIUM" shall mean all rent, additional rent or other consideration
payable by a Transferee in connection with a Transfer in excess of the rent and
Additional Rent payable by Tenant under this Lease during the term of the
Transfer and if such Transfer is less than all of the Premises, the Transfer
Premium shall be calculated on a square foot basis after deducting the
reasonable expenses incurred by Tenant for (i) any changes, alterations and
improvements to the Premises paid for by Tenant in connection with the Transfer,
(ii) any other out-of-pocket monetary concessions provided by Tenant to the
Transferee, and (iii) any brokerage commissions paid for by Tenant in connection
with the Transfer. "Transfer Premium" shall also include, but not be limited to,
key money, bonus money or other cash consideration paid by a transferee to
Tenant in connection with such Transfer, and any payment in excess of fair
market value for services rendered by Tenant to the Transferee and any payment
in excess of fair market value for assets, fixtures, inventory, equipment, or
furniture transferred by Tenant to the Transferee in connection with such
Transfer. Any sale assignment, hypothecation, transfer or subletting of this
Lease which is not in compliance with the provisions of this Article 15 shall be
void and shall, at the option of Landlord, terminate this Lease. In no event
shall the consent by Landlord to an assignment or subletting be construed as
relieving Tenant, any assignee, or sublessee from obtaining the express written
consent of Landlord to any further assignment or subletting, or as

                                      -15-

<PAGE>   21

releasing Tenant from any liability or obligation hereunder whether or not then
accrued and Tenant shall continue to be fully liable therefor. No collection or
acceptance of rent by Landlord from any person other than Tenant shall be deemed
a waiver of any provision of this Article 15 or the acceptance of any assignee
or subtenant hereunder, or a release of Tenant (or of any successor of Tenant or
any subtenant). Notwithstanding anything to the contrary in this Lease, if
Tenant or any proposed Transferee claims that Landlord has unreasonably withheld
or delayed its consent under this Article 15 or otherwise has breached or acted
unreasonably under this Article 15, their sole remedies shall be a declaratory
judgment, an injunction for the relief sought and/or any monetary damages, and
Tenant hereby waives any right at law or equity to terminate this Lease.

          Notwithstanding anything to the contrary contained in this Article 15,
Landlord shall have the option, by giving written notice to Tenant within thirty
(30) days after Landlord's receipt of a request for consent to a proposed
Transfer, to terminate this Lease as to the portion of the Premises that is the
subject of the Transfer. If this Lease is so terminated with respect to less
than the entire Premises, the Basic Rental and Tenant's Proportionate Share
shall be prorated based on the number of square feet retained by Tenant as
compared to the total number of square feet contained in the original Premises,
and this Lease as so amended shall continue thereafter in full force and effect,
and upon the request of either party, the parties shall execute written
confirmation of the same.

                                   ARTICLE 16

                              DAMAGE OR DESTRUCTION

          Within sixty (60) days after the date Landlord learns of the necessity
for repairs as a result of damage, Landlord shall notify Tenant ("DAMAGE REPAIR
ESTIMATE") of Landlord's estimated assessment of the period of time in which the
repairs will be completed. If the Project is damaged by fire or other insured
casualty and the insurance proceeds have been made available therefor by the
holder or holders of any mortgages or deeds of trust covering the Premises or
the Project, the damage shall be repaired by Landlord to the extent such
insurance proceeds are available therefor and provided the Damage Repair
Estimate indicates that repairs can be completed within one hundred eighty (180)
days after the necessity for repairs as a result of such damage becomes known to
Landlord without the payment of overtime or other premiums, and until such
repairs are completed rent shall be abated in proportion to the part of the
Premises which is unusable by Tenant in the conduct of its business (but there
shall be no abatement of rent by reason of any portion of the Premises being
unusable for a period equal to one (1) day or less). However, if the damage is
due to the fault or neglect of Tenant, its employees, agents, contractors,
guests, invitees and the like, there shall be no abatement of rent, unless and
to the extent Landlord receives rental income insurance proceeds. Upon the
occurrence of any damage to the Premises, Tenant shall assign to Landlord (or to
any party designated by Landlord) all insurance proceeds payable to Tenant under
Section 14(a)(ii)(A) above; provided, however, that if the cost of repair of
improvements within the Premises by Landlord exceeds the amount of insurance
proceeds received by Landlord from Tenant's insurance carrier, as so assigned by
Tenant, such excess costs shall be paid by Tenant to Landlord prior to
Landlord's repair of such damage. If, however, the Damage Repair Estimate
indicates that repairs cannot be completed within one hundred eighty (180) days
after the. necessity for repairs as a result of such damage becomes known to
Landlord without the payment of overtime or other premiums, Landlord may, at its
option, either (i) make them in a reasonable time and in such event this Lease
shall continue in effect and the rent shall be abated, if at all, in the manner
provided in this Article 16, or (ii) elect not to effect such repairs and
instead terminate this Lease, by notifying Tenant in writing of such termination
within sixty (60) days after Landlord learns of the necessity for repairs as a
result of damage, such notice to include a termination date giving Tenant sixty
(60) days to vacate the Premises. In addition, Landlord may elect to terminate
this Lease if the Project shall be damaged by fire or other casualty or cause,
whether or not the Premises are affected, and the damage is not fully covered,
except for deductible amounts, by Landlord's insurance policies. However, if
Landlord does not elect to terminate this Lease pursuant to Landlord's
termination right as provided above, and the Damage Repair Estimate indicates
that repairs cannot be completed within one hundred eighty (180) days after
being commenced, Tenant may elect, not later than thirty (30) days after
Tenant's receipt of the Damage Repair Estimate, to terminate this Lease by
written notice to Landlord effective as of the date specified in Tenant's
notice. Finally, if the Premises or the Project is damaged to any

                                      -16-

<PAGE>   22

substantial extent during the last twelve (12) months of the Term, then
notwithstanding anything contained in this Article 16 to the contrary, Landlord
shall have the option to terminate this Lease by giving written notice to Tenant
of the exercise of such option within sixty (60) days after Landlord learns of
the necessity for repairs as the result of such damage. In the event that the
Premises or the Project is destroyed or damaged to any substantial extent during
the last twelve (12) months of the Lease Term and if such damage shall take
longer than sixty (60) days to repair and if such damage is not the result of
the negligence or willful misconduct of Tenant or Tenant's employees, licensees,
invitees or agents, then notwithstanding anything in this Article 16 to the
contrary, Tenant shall have the option to terminate this Lease by written notice
to Landlord of the exercise of such option within sixty (60) days after Tenant
learns of the necessity for repairs as the result of such damage. A total
destruction of the Project shall automatically terminate this Lease. Except as
provided in this Article 16, there shall be no abatement of rent and no
liability of Landlord by reason of any injury to or interference with Tenant's
business or property arising from such damage or destruction or the making of
any repairs, alterations or improvements in or to any portion of the Project or
the Premises or in or to fixtures, appurtenances and equipment therein. Tenant
understands that Landlord will not carry insurance of any kind on Tenant's
furniture, furnishings, trade fixtures or equipment, and that Landlord shall not
be obligated to repair any damage thereto or replace the same. Except for
proceeds relating to Tenant's furniture, furnishings, trade fixtures and
equipment, Tenant acknowledges that Tenant shall have no right to any proceeds
of insurance relating to property damage. With respect to any damage which
Landlord is obligated to repair or elects to repair, Tenant, as a material
inducement to Landlord entering into this Lease, irrevocably waives and releases
its rights under the provisions of Sections 1932 and 1933 of the California
Civil Code.

                                   ARTICLE 17

                                  SUBORDINATION

          This Lease is subject and subordinate to all ground or underlying
leases, mortgages and deeds of trust which affect the property or the Project,
including all renewals, modifications, consolidations, replacements and
extensions thereof; provided, however, if the lessor under any such lease or the
holder or holders of any such mortgage or deed of trust shall advise Landlord
that they desire or require this Lease to be prior and superior thereto, upon
written request of Landlord to Tenant, Tenant agrees to promptly execute,
acknowledge and deliver any and all documents or instruments which Landlord or
such lessor, holder or holders deem necessary or desirable for purposes thereof.
Landlord shall have the right to cause this Lease to be and become and remain
subject and subordinate to any and all ground or underlying leases, mortgages or
deeds of trust which may hereafter be executed covering the Premises, the
Project or the property or any renewals, modifications, consolidations,
replacements or extensions thereof, for the full amount of all advances made or
to be made thereunder and without regard to the time or character of such
advances, together with interest thereon and subject to all the terms and
provisions thereof; provided, however, that Landlord obtains from the lender or
other party in question a written undertaking in favor of Tenant to the effect
that such lender or other party will not disturb Tenant's right of possession
under this Lease if Tenant is not then or thereafter in breach of any covenant
or provision of this Lease. Tenant agrees, within ten (10) days after Landlord's
written request therefor, to execute, acknowledge and deliver upon request any
and all documents or instruments requested by Landlord or necessary or proper to
assure the subordination of this Lease to any such mortgages, deed of trust, or
leasehold estates. Tenant agrees that in the event any proceedings are brought
for the foreclosure of any mortgage or deed of trust or any deed in lieu
thereof, to attorn to the purchaser or any successors thereto upon any such
foreclosure sale or deed in lieu thereof as so requested to do so by such
purchaser and to recognize such purchaser as the lessor under this Lease; Tenant
shall, within ten (10) days after request execute such further instruments or
assurances as such purchaser may reasonably deem necessary to evidence or
confirm such attornment. Tenant agrees to provide copies of any notices of
Landlord's default under this Lease to any mortgagee or deed of trust
beneficiary whose address has been provided to Tenant and Tenant shall provide
such mortgagee or deed of trust beneficiary a commercially reasonable time after
receipt of such notice within which to cure any such default. Tenant waives the
provisions of any current or future statute, rule or law which may give or
purport to give Tenant any right or election to terminate or otherwise adversely
affect this Lease and the obligations of the Tenant hereunder in the event of
any foreclosure proceeding or sale.

                                      -17-

<PAGE>   23

                                   ARTICLE 18

                                 EMINENT DOMAIN

          If the whole of the Premises or the Project or so much thereof as to
render the balance unusable by Tenant shall be taken under power of eminent
domain, or is sold, transferred or conveyed in lieu thereof, this Lease shall
automatically terminate as of the date of such condemnation, or as of the date
possession is taken by the condemning authority, at Landlord's option. No award
for any partial or entire taking shall be apportioned, and Tenant hereby assigns
to Landlord any award which may be made in such taking or condemnation, together
with any and all rights of Tenant now or hereafter arising in or to the same or
any part thereof; provided, however, that nothing contained herein shall be
deemed to give Landlord any interest in or to require Tenant to assign to
Landlord any award made to Tenant for the taking of personal property and trade
fixtures belonging to Tenant and removable by Tenant at the expiration of the
Term hereof as provided hereunder or for the interruption of, or damage to,
Tenant's business. In the event of a partial taking described in this Article
18, or a sale, transfer or conveyance in lieu thereof, which does not result in
a termination of this Lease, the rent shall be apportioned according to the
ratio that the part of the Premises remaining useable by Tenant bears to the
total area of the Premises. Tenant hereby waives any and all rights it might
otherwise have pursuant to Section 1265.130 of the California Code of Civil
Procedure.

                                   ARTICLE 19

                                     DEFAULT

          (a) Tenant's Default. Each of the following acts or omissions of
Tenant or of any guarantor of Tenant's performance hereunder, or occurrences,
shall constitute an "EVENT OF DEFAULT":

                    (i) Failure or refusal to pay Basic Rental, Additional Rent
or any other amount to be paid by Tenant to Landlord hereunder within five (5)
calendar days after notice that the same is due or payable hereunder; said five
(5) day period shall be in lieu of, and not in addition to, the notice
requirements of Section 1161 of the California Code of Civil Procedure or any
similar or successor law;

                    (ii) Except as set forth in items (i) above and (iii)
through and including (vii) below, failure to perform or observe any other
covenant or condition of this Lease to be performed or observed within thirty
(30) days following written notice to Tenant of such failure; however, if the
nature of such default is such that the same cannot be reasonably cured within a
thirty (30) day period, Tenant shall not be deemed to be in default if Tenant
diligently commences such cure within such period and thereafter diligently
proceeds to rectify and cure said default. Such thirty (30) day notice shall be
in lieu of, and not in addition to, any required under Section 1161 of the
California Code of Civil Procedure or any similar or successor law;

                    (iii) Abandonment or vacating or failure to accept tender of
possession of the Premises or any significant portion thereof;

                    (iv) The taking in execution or by similar process or law
(other than by eminent domain) of the estate hereby created;

                    (v) The filing by Tenant or any guarantor hereunder in any
court pursuant to any statute of a petition in bankruptcy or insolvency or for
reorganization or arrangement for the appointment of a receiver of all or a
portion of Tenant's property; the filing against Tenant or any guarantor
hereunder of any such petition, or the commencement of a proceeding for the
appointment of a trustee, receiver or liquidator for Tenant, or for any
guarantor hereunder, or of any of the property of either, or a proceeding by any
governmental authority for the dissolution or liquidation of Tenant or any
guarantor hereunder, if such proceeding shall not be dismissed or trusteeship
discontinued within thirty (30) days after commencement of such proceeding or
the appointment of such trustee or receiver; or the making by Tenant or any
guarantor hereunder of an assignment for the benefit of creditors. Tenant hereby
stipulates to the lifting of the automatic stay in effect and relief from such
stay for Landlord in the event Tenant files a petition under the

                                      -18-

<PAGE>   24

United States Bankruptcy laws, for the purpose of Landlord pursuing its rights
and remedies against Tenant and/or a guarantor of this Lease;

                    (vi) Tenant's failure to cause to be released any mechanics
liens filed against the Premises or the Project within twenty (20) days after
the date the same shall have been filed or recorded; or

                    (vii) Tenant's failure to observe or perform according to
the provisions of Articles 7, 17 or 25 within five (5) business days after
notice from Landlord.

          (b) Landlord's Default. Notwithstanding anything to the contrary set
forth in this Lease, Landlord shall be in default in the performance of any
obligation required to be performed by Landlord pursuant to this Lease if
Landlord fails to perform such obligation within thirty (30) days after the
receipt of notice from Tenant specifying in detail Landlord's failure to
perform; provided, however, if the nature of Landlord's obligation is such that
more than thirty (30) days are required for its performance, then Landlord shall
not be in default under this Lease if it shall commence such performance within
such thirty (30) day period and thereafter diligently pursue the same to
completion. Upon any such default by Landlord under this Lease, Tenant may,
except as otherwise specifically provided in this Lease to the contrary,
exercise any of its rights provided at law or in equity.

                                   ARTICLE 20

                                    REMEDIES

          (a) Upon the occurrence of an Event of Default under this Lease as
provided in Article 19 hereof, Landlord may exercise all of its remedies as may
be permitted by law, including but not limited to the remedy provided by Section
1951.4 of the California Civil Code, and including without limitation,
terminating this Lease, reentering the Premises and removing all persons and
property therefrom, which property may be stored by Landlord at a warehouse or
elsewhere at the risk, expense and for the account of Tenant. If Landlord elects
to terminate this Lease, Landlord shall be entitled to recover from Tenant the
aggregate of all amounts permitted by law, including but not limited to (i) the
worth at the time of award of the amount of any unpaid rent which had been
earned at the time of such termination; plus (ii) the worth at the time of 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 (iii) the worth at the
time of award of the amount by which the unpaid rent for the balance of the
Lease Term after the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus (iv) 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; and (v) at
Landlord's election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable law. Upon the
occurrence of an Event of Default by Tenant, Tenant shall furthermore be
obligated to reimburse Landlord for any unamortized costs incurred by Landlord
(A) to improve the Premises or for any Tenant Improvement Allowance expended by
Landlord, and (B) for brokerage commissions and attorneys' fees incurred in
connection with this Lease. The term "rent" as used in this Article 20(a) shall
be deemed to be and to mean all sums of every nature required to be paid by
Tenant pursuant to the terms of this Lease, whether to Landlord or to others. As
used in items (i) and (ii), above, the "worth at the time of award" shall be
computed by allowing interest at the rate set forth in item (e), below, but in
no case greater than the maximum amount of such interest permitted by law. As
used in item (iii), above, the "worth at the time of award" shall be 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%).

          (b) Nothing in this Article 20 shall be deemed to affect Landlord's
right to indemnification for liability or liabilities arising prior to the
termination of this Lease for personal injuries or property damage under the
indemnification clause or clauses contained in this Lease.

                                      -19-

<PAGE>   25

          (c) Notwithstanding anything to the contrary set forth herein,
Landlord's re-entry to perform acts of maintenance or preservation of or in
connection with efforts to relet the Premises or any portion thereof, or the
appointment of a receiver upon Landlord's initiative to protect Landlord's
interest under this Lease shall not terminate Tenant's right to possession of
the Premises or any portion thereof and, until Landlord does elect to terminate
this Lease, this Lease shall continue in full force and effect and Landlord may
enforce all of Landlord's rights and remedies hereunder including, without
limitation, the remedy described in California Civil Code Section 1951.4 (lessor
may continue lease in effect after lessee's breach and abandonment and recover
rent as it becomes due, if lessee has the right to sublet or assign, subject
only to reasonable limitations). Accordingly, if Landlord does not elect to
terminate this Lease on account of any default by Tenant, Landlord may, from
time to time, without terminating this Lease, enforce all of its rights and
remedies under this Lease, including the right to recover all rent as it becomes
due.

          (d) All rights, powers and remedies of Landlord hereunder and under
any other agreement now or hereafter in force between Landlord and Tenant shall
be cumulative and not alternative and shall be in addition to all rights, powers
and remedies given to Landlord by law, and the exercise of one or more rights or
remedies shall not impair Landlord's right to exercise any other right or
remedy.

          (e) Any amount due from Tenant to Landlord hereunder which is not paid
when due shall bear interest at the lower of twelve percent (12%) per annum or
the maximum lawful rate of interest from the due date until paid, unless
otherwise specifically provided herein, but the payment of such interest shall
not excuse or cure any default by Tenant under this Lease. In addition to such
interest: (a) if Basic Rental is not paid within five (5) days after the same is
due, a late charge equal to ten percent (10%) of the amount overdue shall be.
assessed and shall accrue for each calendar month or part thereof until such
rental, including the late charge, is paid in full, which late charge Tenant
hereby agrees is a reasonable estimate of the damages Landlord shall suffer as a
result of Tenant's late payment and (b) an additional charge of $25 shall be
assessed for any check given to Landlord by or on behalf of Tenant which is not
honored by the drawee thereof; which damages include Landlord's additional
administrative and other costs associated with such late payment and unsatisfied
checks and the parties agree that it would be impracticable or extremely
difficult to fix Landlord's actual damage in such event. Such charges for
interest and late payments and unsatisfied checks are separate and cumulative
and are in addition to and shall not diminish or represent a substitute for any
or all of Landlord's rights or remedies under any other provision of this Lease.

                                   ARTICLE 21

                         TRANSFER OF LANDLORD'S INTEREST

          In the event of any transfer or termination of Landlord's interest in
the Premises or the Project by sale, assignment, transfer, foreclosure,
deed-in-lieu of foreclosure or otherwise whether voluntary or involuntary,
Landlord shall be automatically relieved of any and all obligations and
liabilities on the part of Landlord from and after the date of such transfer or
termination, including furthermore without limitation, the obligation of
Landlord under Article 4 and California Civil Code 1950.7 above to return the
security deposit, provided said security deposit is transferred to said
transferee. Tenant agrees to attorn to the transferee upon any such transfer and
to recognize such transferee as the lessor under this Lease and Tenant shall,
within five (5) days after request, execute such further instruments or
assurances as such transferee may reasonably deem necessary to evidence or
confirm such attornment.

                                   ARTICLE 22

                                     BROKER

          In connection with this Lease, Tenant warrants and represents that it
has had dealings only with firm(s) set forth in Article 1 .G. of the Basic Lease
Provisions and that it knows of no other person or entity who is or might be
entitled to a commission, finder's fee or other like payment in connection
herewith and does hereby indemnify and agree to hold Landlord, its agents,
members, partners, representatives, officers, affiliates, shareholders,
employees,

                                      -20-

<PAGE>   26

successors and assigns harmless from and against any and all loss, liability and
expenses that Landlord may incur should such warranty and representation prove
incorrect, inaccurate or false. Promptly after Landlord receives a Letter of
Credit from Tenant in the form required by Article 4 hereunder, Landlord shall
pay any brokerage commission due to the broker listed in Article 1.G.

                                   ARTICLE 23

                                     PARKING

          Tenant and Tenant's employees and visitors shall be entitled to use,
commencing on the Commencement Date, the number of unreserved parking passes set
forth in Section 1 .H. of the Basic Lease Provisions, which parking passes shall
pertain to the Project parking facility. Tenant shall be responsible for the
full amount of any taxes imposed by any governmental authority in connection
with the renting of such parking passes by Tenant or the use of the parking
facility by Tenant. Tenant's continued right to use the parking passes is
conditioned upon Tenant abiding by all rules and regulations which are
prescribed from time to time for the orderly operation and use of the parking
facility where the parking passes are located, including any sticker or other
identification system established by Landlord, Tenant's cooperation in seeing
that Tenant's employees and visitors also comply with such rules and
regulations, and Tenant not being in default under this Lease. Landlord
specifically reserves the right to change the size, configuration, design,
layout and all other aspects of the Project parking facility at any time and
Tenant acknowledges and agrees that Landlord may, without incurring any
liability to Tenant and without any abatement of rent under this Lease, from
time to time, close-off or restrict access to the Project parking facility for
purposes of permitting or facilitating any such construction, alteration or
improvements. Landlord may delegate its responsibilities hereunder to a parking
operator or a lessee of the parking facility in which case such parking operator
or lessee shall have all the rights of control attributed hereby to the
Landlord. The parking passes provided to Tenant pursuant to this Article 23 are
provided to Tenant solely for use by Tenant's own personnel and such passes may
not be transferred, assigned, subleased or otherwise alienated by Tenant without
Landlord's prior approval.

                                   ARTICLE 24

                                     WAIVER

          No waiver by Landlord or Tenant of any provision of this Lease shall
be deemed to be a waiver of any other provision hereof or of any subsequent
breach of the same or any other provision. No provision of this Lease may be
waived by Landlord or Tenant, except by an instrument in writing executed by
Landlord and Tenant. Landlord's consent to or approval of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to render
unnecessary the obtaining of Landlord's consent to or approval of any subsequent
act of Tenant, whether or not similar to the act so consented to or approved. No
act or thing done by Landlord or Landlord's agents during the Term of this Lease
shall be deemed an acceptance of a surrender of the Premises, and no agreement
to accept such surrender shall be valid unless in writing and signed by
Landlord. 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. Any payment by Tenant or receipt by
Landlord of an amount less than the total amount then due hereunder shall be
deemed to be in partial payment only thereof and not a waiver of the balance due
or an accord and satisfaction, notwithstanding any statement or endorsement to
the contrary on any check or any other instrument delivered concurrently
therewith or in reference thereto. Accordingly, Landlord may accept any such
amount and negotiate any such check without prejudice to Landlord's right to
recover all balances due and owing and to pursue its other rights against Tenant
under this Lease, regardless of whether Landlord makes any notation on such
instrument of payment or otherwise notifies Tenant that such acceptance or
negotiation is without prejudice to Landlord's rights.

                                      -21-

<PAGE>   27

                                   ARTICLE 25

                              ESTOPPEL CERTIFICATE

          Tenant shall, at any time and from time to time, upon not less than
ten (10) days' prior written notice from Landlord, execute, acknowledge and
deliver to Landlord a statement in writing certifying the following information,
(but not limited to the following information in the event further information
is requested by Landlord): (i) that this Lease is unmodified and in full force
and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as modified, is in full force and effect); (ii) the
dates to which the rental and other charges are paid in advance, if any; (iii)
the amount of Tenant's security deposit, if any; and (iv) acknowledging that
there are not, to Tenant's knowledge, any uncured defaults on the part of
Landlord hereunder, and no events or conditions then in existence which, with
the passage of time or notice or both, would constitute a default on the part of
Landlord hereunder, or specifying such defaults, events or conditions, if any
are claimed. It is expressly understood and agreed that any such statement may
be relied upon by any prospective purchaser or encumbrancer of all or any
portion of the Real Property. Tenant's failure to deliver such statement within
such time shall constitute an admission by Tenant that all statements contained
therein are true and correct.

                                   ARTICLE 26

                              LIABILITY OF LANDLORD

          Notwithstanding anything in this Lease to the contrary, any remedy of
Tenant for the collection of a judgment (or other judicial process) requiring
the payment of money by Landlord in the event of any default by Landlord
hereunder or any claim, cause of action or obligation, contractual, statutory or
otherwise by Tenant against Landlord concerning, arising out of or relating to
any matter relating to this Lease and all of the covenants and conditions or any
obligations, contractual, statutory, or otherwise set forth herein, shall be
limited solely and exclusively to an amount which is equal to the lesser of (i)
the interest of Landlord in and to the Project, and (ii) the interest Landlord
would have in the Project if the Project were encumbered by third party debt in
an amount equal to ninety percent (90%) of the then current value of the
Project. No other property or assets of Landlord, or any member, officer,
director, shareholder, partner, trustee, agent, servant or employee of Landlord
(the "REPRESENTATIVE") shall be subject to levy, execution or other enforcement
procedure for the satisfaction of Tenant's remedies under or with respect to
this Lease, Landlord's obligations to Tenant, whether contractual, statutory or
otherwise, the relationship of Landlord and Tenant hereunder, or Tenant's use or
occupancy of the Premises. Tenant further understands that any liability, duty
or obligation of Landlord to Tenant, shall automatically cease and terminate as
of the date that Landlord or any of Landlord's Representatives no longer have
any right, title or interest in or to the Project. Notwithstanding anything to
the contrary in this Lease, Landlord shall not be liable under any circumstances
for injury or damage to, or interference with, Tenant's business, including but
not limited to, loss of profits, loss of rents or other revenues, loss of
business opportunity, loss of goodwill or loss of use, in each case, however
occurring.

                                   ARTICLE 27

                              INABILITY TO PERFORM

          This Lease and the obligations of both parties hereunder shall not be
affected or impaired because such party is unable to fulfill any of its
obligations hereunder or is delayed in doing so, if such inability or delay is
caused by reason of any prevention, delay, stoppage due to strikes, lockouts,
acts of God, or any other cause previously, or at such time, beyond the
reasonable control or anticipation of such party (collectively, a "FORCE
MAJEURE") and both parties' obligations under this Lease shall be forgiven and
suspended by any such Force Majeure; provided, however, that this Article 27 is
not intended to, and shall not, extend the time period for the payment of any
monetary amounts due (including, without limitation, rent payments from Tenant)
from either party to the other under this Lease nor relieve either party from
their monetary obligations to the other under this Lease.

                                      -22-

<PAGE>   28

                                   ARTICLE 28

                                 HAZARDOUS WASTE

          (a) Tenant shall not cause or permit any Hazardous Material (as
defined in Article 28(c) below) to be brought, kept or used in or about the
Project by Tenant, its agents, employee, contractors, or invitees. Tenant
indemnifies Landlord from and against any breach by Tenant of the obligations
stated in the preceding sentence, and Tenant agrees to defend and hold Landlord
harmless from and against any and all claims, judgments, damages, penalties,
fines, costs, liabilities, or losses (including, without limitation, diminution
in value of the Project, damages for the loss or restriction or use of rentable
or usable space or of any amenity of the Project, damages arising from any
adverse impact or marketing of space in the Project, and sums paid in settlement
of claims, attorneys' fees and costs, consultant fees, and expert fees) which
arise during or after the Term of this Lease as a result of such breach. This
indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any cleanup,
remedial, removal, or restoration work required by any federal, state, or local
governmental agency or political subdivision because of Hazardous Material
present in the soil or ground water on or under the Project. Without limiting
the foregoing, if the presence of any Hazardous Material on the Project caused
or permitted by Tenant results in any contamination of the Project and subject
to the provisions of Articles 9, 10 and 11, hereof, Tenant shall promptly take
all actions at its sole expense as are necessary to return the Project to the
condition existing prior to the introduction of any such Hazardous Material and
the contractors to be used by Tenant for such work must be approved by Landlord,
which approval shall not be unreasonably withheld so long as such actions would
not potentially have any material adverse long-term or short-term effect on the
Project and so long as such actions do not materially interfere with the use and
enjoyment of the Project by the other tenants thereof. Tenant's obligations
under this Section 28(a) shall survive the expiration or earlier termination of
this Lease.

          (b) It shall not be unreasonable for Landlord to withhold its consent
to any proposed Transfer if (i) the proposed transferee's anticipated use of the
Premises involves the generation, storage, use, treatment, or disposal of
Hazardous Material; (ii) the proposed Transferee has been required by any prior
landlord, lender, or governmental authority to take remedial action in
connection with Hazardous Material contaminating a property if the contamination
resulted from such Transferee's actions or use of the property in question; or
(iii) the proposed Transferee is subject to an enforcement order issued by any
governmental authority in connection with the use, disposal, or storage of a
Hazardous Material.

          (c) As used herein, the term "HAZARDOUS MATERIAL" means any hazardous
or toxic substance, material, or waste which is or becomes regulated by any
local governmental authority, the State of California or the United States
Government. The term "Hazardous Material" includes, without limitation, any
material or substance which is (i) defined as "Hazardous Waste," "Extremely
Hazardous Waste," or "Restricted Hazardous Waste" under Sections 25115, 25117 or
25122.7, or listed pursuant to Section 25140, of the California Health and
Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii)
defined as a "Hazardous Substance" under Section 25316 of the California Health
and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous
Substance Account Act), (iii) defined as a "Hazardous Material," "Hazardous
Substance," or "Hazardous Waste" under Section 25501 of the California Health
and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response
Plans and Inventory), (iv) defined as a "Hazardous Substance" under Section
25281 of the California Health and Safety Code, Division 20, Chapter 6.7
(Underground Storage of Hazardous Substances), (v) petroleum, (vi) asbestos,
(vii) listed under Article 9 or defined as Hazardous or extremely hazardous
pursuant to Article 11 of Title 22 of the California Administrative Code,
Division 4, Chapter 20, (viii) designated as a "Hazardous Substance" pursuant to
Section 311 of the Federal Water Pollution Control Act (33 U.S.C. Section 1317),
(ix) defined as a "Hazardous Waste" pursuant to Section 1004 of the Federal
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42
U.S.C. Section 6903), or (x) defined as a "Hazardous Substance" pursuant to
Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq. (42 U.S.C. Section 9601).

          (d) As used herein, the term "ENVIRONMENTAL LAWS" mean any applicable
federal, state or local laws, ordinances, or regulations relating to any
Hazardous Material affecting the

                                      -23-

<PAGE>   29

Project, including, without limitation, the laws, ordinances, and regulations
referred to in Article 28(c) above.

                                   ARTICLE 29

                   SURRENDER OF PREMISES: REMOVAL OF PROPERTY

          (a) The voluntary or other surrender of this Lease by Tenant to
Landlord, or a mutual termination hereof, shall not work a merger, and shall at
the option of Landlord, operate as an assignment to it of any or all subleases
or subtenancies affecting the Premises.

          (b) Upon the expiration of the Term of this Lease, or upon any earlier
termination of this Lease, Tenant shall quit and surrender possession of the
Premises to Landlord in as good order and condition as the same are now and
hereafter may be improved by Landlord or Tenant, reasonable wear and tear and
repairs which are Landlord's obligation excepted, and shall, without expense to
Landlord, remove or cause to be removed from the Premises all debris and
rubbish, all furniture, equipment, business and trade fixtures, free-standing
cabinet work, moveable partitioning, telephone and data cabling and other
articles of personal property owned by Tenant or installed or placed by Tenant
at its own expense in the Premises, and all similar articles of any other
persons claiming under Tenant unless Landlord exercises its option to have any
subleases or subtenancies assigned to it, and Tenant shall repair all damage to
the Premises resulting from the installation and removal of such items to be
removed.

          (c) Whenever Landlord shall reenter the Premises as provided in
Article 12 hereof, or as otherwise provided in this Lease, any property of
Tenant not removed by Tenant upon the expiration of the Term of this Lease (or
within forty-eight (48) hours after a termination by reason of Tenant's
default), as provided in this Lease, shall be considered abandoned and Landlord
may remove any or all of such items and dispose of the same in any manner or
store the same in a public warehouse or elsewhere for the account and at the
expense and risk of Tenant, and if Tenant shall fail to pay the cost of storing
any such property after it has been stored for a period of ninety (90) days or
more, Landlord may sell any or all of such property at public or private sale,
in such manner and at such times and places as Landlord, in its sole discretion,
may deem proper, without notice or to demand upon Tenant, for the payment of all
or any part of such charges or the removal of any such property, and shall apply
the proceeds of such sale as follows: first, to the cost and expense of such
sale, including reasonable attorneys' fees and costs for services rendered;
second, to the payment of the cost of or charges for storing any such property;
third, to the payment of any other sums of money which may then or thereafter be
due to Landlord from Tenant under any of the terms hereof; and fourth, the
balance, if any, to Tenant.

          (d) All fixtures, equipment, leasehold improvements, Alterations
and/or appurtenances attached to or built into the Premises prior to or during
the Term, whether by Landlord or Tenant and whether at the expense of Landlord
or Tenant, or of both, shall be and remain part of the Premises and shall not be
removed by Tenant at the end of the Term unless otherwise expressly provided for
in this Lease or unless such removal is required by Landlord. Such fixtures,
equipment, leasehold improvements, Alterations, additions, improvements and/or
appurtenances shall include but not be limited to: all floor coverings, drapes,
paneling, built-in cabinetry, molding, doors, vaults (including vault doors),
plumbing systems, security systems electrical systems, lighting systems,
silencing equipment, communication systems, all fixtures and outlets for the
systems mentioned above and for all telephone, radio, telegraph and television
purposes, and any special flooring or ceiling installations.

                                   ARTICLE 30

                                  MISCELLANEOUS

          (a) Severability; Entire Agreement. Any provision of this Lease which
shall prove to be invalid, void, or illegal shall in no way affect, impair or
invalidate any other provision hereof and such other provisions shall remain in
full force and effect. This Lease and the Exhibits attached hereto constitute
the entire agreement between the parties hereto with respect to the subject
matter hereof, and no prior agreement or understanding pertaining to any such
matter

                                      -24-

<PAGE>   30

shall be effective for any purpose. No provision of this Lease may be amended or
supplemented except by an agreement in writing signed by the parties hereto or
their successor in interest.

          (b) Attorneys' Fees; Waiver of Jury Trial.

                    (i) In any action to enforce the terms of this Lease,
including any suit by Landlord for the recovery of rent or possession of the
Premises, the losing party shall pay the successful party a reasonable sum for
attorneys' fees and costs in such suit and such attorneys' fees and costs shall
be deemed to have accrued prior to the commencement of such action and shall be
paid whether or not such action is prosecuted to judgment.

                    (ii) 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.

          (c) Time of Essence. Time is of the essence with respect to the
performance of every provision of this Lease.

          (d) Headings; Joint and Several. The article headings contained in
this Lease are for convenience only and do not in any way limit or amplify any
term or provision hereof. The terms "Landlord" and "Tenant" as used herein shall
include the plural as well as the singular, the neuter shall include the
masculine and feminine genders and the obligations herein imposed upon Tenant
shall be joint and several as to each of the persons, firms or corporations of
which Tenant may be composed.

          (e) Reserved Area. Tenant hereby acknowledges and agrees that the
exterior walls of the Premises and the area (if any) between the finished
ceiling of the Premises and the slab of the floor of the project thereabove have
not been demised hereby and the use thereof together with the right to install,
maintain, use, repair and replace pipes, ducts, conduits and wires leading
through, under or above the Premises in locations which will not materially
interfere with Tenant's use of the Premises and serving other parts of the
Project are hereby excepted and reserved unto Landlord.

          (f) NO OPTION. THE SUBMISSION OF THIS LEASE BY LANDLORD, ITS AGENT OR
REPRESENTATIVE FOR EXAMINATION OR EXECUTION BY TENANT DOES NOT CONSTITUTE AN
OPTION OR OFFER TO LEASE THE PREMISES UPON THE TERMS AND CONDITIONS CONTAINED
HEREIN OR A RESERVATION OF THE PREMISES IN FAVOR OF TENANT, IT BEING INTENDED
HEREBY THAT THIS LEASE SHALL ONLY BECOME EFFECTIVE UPON THE EXECUTION HEREOF BY
LANDLORD AND TENANT AND DELIVERY OF A FULLY EXECUTED LEASE TO TENANT.

          (g) Use of Project Name; Improvements. Tenant shall not be allowed to
use the name, picture or representation of the Project, or words to that effect,
in connection with any business carried on in the Premises or otherwise (except
as Tenant's address) without the prior written consent of Landlord. In the event
that Landlord undertakes any additional improvements on the Real Property
including but not limited to new construction or renovation or additions to the
existing improvements, Landlord shall not be liable to Tenant for any noise,
dust, vibration or interference with access to the Premises or disruption in
Tenant's business caused thereby.

          (h) Rules and Regulations. Tenant shall observe faithfully and comply
strictly with the Rules and Regulations attached to this Lease as Exhibit "B"
and made a part hereof, and such other Rules and Regulations as Landlord may
from time to time reasonably adopt for the safety, care and cleanliness of the
Project, the facilities thereof, or the preservation of good order therein.
Landlord shall not be liable to Tenant for violation of any such Rules and
Regulations, or for the breach of any covenant or condition in any lease by any
other tenant in the Project. A waiver by Landlord of any Rule or Regulation for
any other tenant shall not constitute nor be deemed a waiver of the Rule or
Regulation for this Tenant.

          (i) Quiet Possession. Upon Tenant's paying the Basic Rent, Additional
Rent and other sums provided hereunder and observing and performing all of the
covenants, conditions and provisions on Tenant's part to be observed and
performed hereunder, Tenant shall have quiet

                                      -25-

<PAGE>   31

possession of the Premises for the entire Term hereof, subject to all of the
provisions of this Lease.

          (j) Rent. All payments required to be made hereunder to Landlord shall
be deemed to be rent, whether or not described as such.

          (k) Successors and Assigns. Subject to the provisions of Article 15
hereof, 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, successors and assigns.

          (1) Notices. Any notice required or permitted to be given hereunder
shall be in writing and may be given by personal service evidenced by a signed
receipt or sent by registered or certified mail, return receipt requested, or
via overnight courier, and shall be effective upon proof of delivery, addressed
to Tenant at the Premises or to Landlord at the management office for the
Project, with a copy to Landlord, do Arden Realty, Inc., 11601 Wilshire
Boulevard, Fourth Floor, Los Angeles, California 90025, Attn: Legal Department.
Either party may by notice to the other specify a different address for notice
purposes except that, upon Tenant's taking possession of the Premises, the
Premises shall constitute Tenant's address for notice purposes. A copy of all
notices to be given to Landlord hereunder shall be concurrently transmitted by
Tenant to such party hereafter designated by notice from Landlord to Tenant. Any
notices sent by Landlord regarding or relating to eviction procedures, including
without limitation three day notices, may be sent by regular mail.

          (m) Intentionally Omitted.

          (n) Right of Landlord to Perform. All covenants and agreements to be
performed by Tenant under any of the terms of this Lease shall be performed by
Tenant at Tenant's sole cost and expense and without any abatement of rent. If
Tenant shall fail to pay any sum of money, other than rent, required to be paid
by it hereunder or shall fail to perform any other act on its part to be
performed hereunder, and such failure shall continue beyond any applicable cure
period set forth in this Lease, Landlord may, but shall not be obligated to,
without waiving or releasing Tenant from any obligations of Tenant, make any
such payment or perform any such other act on Tenant's part to be made or
performed as is in this Lease provided. All sums so paid by Landlord and all
reasonable incidental costs, together with interest thereon at the rate of ten
percent (10%) per annum from the date of such payment by Landlord, shall be
payable to Landlord on demand and Tenant covenants to pay any such sums, and
Landlord shall have (in addition to any other right or remedy of Landlord) the
same rights and remedies in the event of the nonpayment thereof by Tenant as in
the case of default by Tenant in the payment of the rent.

          (o) Access, Changes in Project. Facilities, Name.

                    (i) Every part of the Project except the inside surfaces of
all walls, windows and doors bounding the Premises, and any space in or adjacent
to the Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts,
electric or other utilities, sinks or other building facilities, and the use
thereof, as well as access thereto through the Premises for the purposes of
operation, maintenance, decoration and repair, are reserved to Landlord.

                    (ii) Tenant shall permit Landlord to install, use and
maintain pipes, ducts and conduits within the walls, columns and ceilings of the
Premises.

                    (iii) Landlord reserves the right, without incurring any
liability to Tenant therefor, to make such changes in or to the Project and the
fixtures and equipment thereof, as well as in or to the street entrances, halls,
passages, elevators, stairways and other improvements thereof, as it may deem
necessary or desirable.

                    (iv) Landlord may adopt any name for the Project and
Landlord reserves the right to change the name or address of the Project at any
time.

          (p) Signing Authority. If Tenant is a corporation, partnership or
limited liability company, each individual executing this Lease on behalf of
said entity represents and warrants that this Lease is binding upon said entity
in accordance with its terms, and that he or she is duly authorized to execute
and deliver this Lease on behalf of said entity in accordance with: (i) if
Tenant is a corporation, a duly adopted resolution of the Board of Directors of
said corporation

                                      -26-

<PAGE>   32

or in accordance with the By-laws of said corporation, (ii) if Tenant is a
partnership, the terms of the partnership agreement, and (iii) if Tenant is a
limited liability company, the terms of its operating agreement. Concurrently
with Tenant's execution of this Lease, Tenant shall provide to Landlord a copy
of: (a) if Tenant is a corporation, such resolution of the Board of Directors
authorizing the execution of this Lease on behalf of such corporation, which
copy of resolution shall be duly certified by the secretary or an assistant
secretary of the corporation to be a true copy of a resolution duly adopted by
the Board of Directors of said corporation and shall be in the form of Exhibit
"E" or in some other form reasonably acceptable to Landlord, (b) if Tenant is a
partnership, a copy of the provisions of the partnership agreement granting the
requisite authority to each individual executing this Lease on behalf of said
partnership, and (c) if Tenant is a limited liability company, a copy of the
provisions of its operating agreement granting the requisite authority to each
individual executing this Lease on behalf of said limited liability company. In
the event Tenant fails to comply with the requirements set forth in this
subparagraph (p), then each individual executing this Lease shall be personally
liable for all of Tenant's obligations in this Lease.

          (q) Intentionally Omitted.

          (r) Intentionally Omitted.

          (s) Survival of Obligations. Any obligations of Tenant occurring prior
to the expiration or earlier termination of this Lease shall survive such
expiration or earlier termination.

          (t) Intentionally Omitted.

          (u) Governing Law. This Lease shall be governed by and construed in
accordance with the laws of the State of California. No conflicts of law rules
of any state or country (including, without limitation, California conflicts of
law rules) shall be applied to result in the application of any substantive or
procedural laws of any state or country other than California. All
controversies, claims, actions or causes of action arising between the parties
hereto and/or their respective successors and assigns, shall be brought, heard
and adjudicated by the courts of the State of California, with venue in the
County of San Diego. Each of the parties hereto hereby consents to personal
jurisdiction by the courts of the State of California in connection with any
such controversy, claim, action or cause of action, and each of the parties
hereto consents to service of process by any means authorized by California law
and consent to the enforcement of any judgment so obtained in the courts of the
State of California on the same terms and conditions as if such controversy,
claim, action or cause of action had been originally heard and adjudicated to a
final judgment in such courts. Each of the parties hereto further acknowledges
that the laws and courts of California were freely and voluntarily chosen to
govern this Lease and to adjudicate any claims or disputes hereunder.

          (v) Exhibits and Addendum. The Exhibits and Addendum, if applicable,
attached hereto are incorporated herein by this reference as if fully set forth
herein.

          IN WITNESS WHEREOF, the parties have executed this Lease, consisting
of the foregoing provisions and Articles, including all exhibits and other
attachments referenced therein, as of the date first above written.

<TABLE>
<S>                                    <C>
"LANDLORD"                             ARDEN REALTY FINANCE IV, L.L.C.,
                                       a Delaware limited liability company

                                       By:  /s/ VICTOR J. COLEMAN
                                            -----------------------
                                            Victor J. Coleman
                                            Its: President and COO

                                       By:  /s/ ROBERT C. PEDDICORD
                                            -----------------------
                                            Robert C. Peddicord
                                            Its: Senior Vice President
</TABLE>

                    [SIGNATURES CONTINUED ON FOLLOWING PAGE]

                                      -27-

<PAGE>   33

<TABLE>
<S>                                    <C>
"TENANT"                               PATRIOT SCIENTIFIC CORPORATION,
                                       a Delaware corporation

                                       By:  /s/  RICHARD G. BLUM
                                            -----------------------

                                       Print Name Richard G. Blum
                                            Title:  President and CEO

                                       By:  /s/  LOWELL W. GIFFHORN
                                            -----------------------
                                       Print Name Lowell W. Giffhorn
                                            Title  Exec VP and CFO

</TABLE>

                                      -28-<PAGE>   1
                                                                   EXHIBIT 10.28

EMPLOYMENT AGREEMENT dated as of January 1, 2001, between PATRIOT SCIENTIFIC
CORPORATION, a Delaware Corporation (the "Company"), and David H. Pohl (the
"Executive").

WITNESSETH:

1. Term of Employment.

          (a) The Company hereby agrees to employ the Executive and the
Executive hereby agrees to accept employment as Secretary of the Company for a
two and one-half year period commencing January 1, 2001, or for such shorter
period as may be mutually agreed by the Company and the Executive (the
"Employment Period')' subject to the terms and conditions of this Agreement. In
his capacity as Secretary of the Company, Executive will be responsible for the
general duties associated with his title including, but not limited to attending
meetings of the Board of Directors, taking minutes of meetings, and maintaining
the Minute Books and Corporation Records of the Company and/or such other
management duties of a same or similar nature on behalf of the Company as may be
assigned to him from time to time by the President and Chief Executive Officer
("CEO") of the Company.

          (b) The Executive agrees that, during the Employment Period, he will
serve the Company faithfully and to the best of his abilities, devoting such
time, energy and skill to the activities of the Company and the promotion of its
interests as would be typical for his position, although it is understood that
this is a part time position and the Executive shall not be required to devote
more than 10 hours per week to the position unless otherwise agreed between the
parties. It is expressly understood that the Executive may devote a reasonable
amount of time to such other business, charitable, civic and personal affairs as
shall not interfere with the obligations set forth in the preceding sentence.
The Executive agrees not to work for or participate in any business that
adversely and directly impacts his duties and obligations to the Company or
competes with the Company during his employment with the Company.

2. Compensation and Benefit Plans

          (a) The Executive shall receive a base salary during the Employment
Period which shall be payable in installments at such times as other employees
are paid but in any case at least monthly as follows: (1) During the first year
of the Employment Period (`Year One"), the Executive shall receive a gross base
salary of not less than two thousand dollars ($2,000.00) per month for his
services as Secretary of the Company; (2) During the second year of the
Employment Period ("Year Two"), the Executive shall receive a base salary of not
less than the base salary received in Year One. The base salary received in any
year shall be subject to other upward adjustments as shall be recommended by the
President and CEO of the Company to the Board of Directors of the Company (the
"Board") and as shall be approved by the Board and Compensation Committee.

          (b) The Executive is entitled, at the discretion of the Board of
Directors of the Company, to an Annual Incentive Bonus up to 50% of the total
yearly base compensation for the applicable year (the "Annual Incentive Bonus").
The Annual Incentive Bonus payment will be based upon mutually agreed upon
objectives and levels of performance, if any, and shall otherwise be at the
discretion of the Board of Directors.

          (c) The Executive shall be eligible to participate in all employee
benefit programs, if any, maintained by the Company, including, but not limited
to, group life insurance, medical, dental, retirement and pension plans, any
deferred compensation profit sharing plans, 401(k) savings plan, and other such
fringe benefits as are or may be available from time to time to senior
executives of the Company, including without limitation a car allowance of $400
per month. During the Employment Period, the Executive is entitled to 4 weeks
vacation per annum.

          (d) The Company will pay or reimburse the Executive during the
Employment Period for all expenses normally reimbursed by the Company and
reasonably incurred by the Executive in furtherance of his duties hereunder and
authorized by the Company, including but not limited to, expenses of
entertainment, travel, meals, hotel accommodations and the like upon the
submission of the Executive of vouchers or an itemized list thereof and as may
be required in order to permit such payments as proper

                                        1

<PAGE>   2

deductions for the Company under the Internal Revenue Code of 1986 and the rules
and regulations adopted pursuant thereto now or hereafter in effect.

3. Stock Options.

          (a) The Executive will be granted an option to purchase twenty-five
thousand (25,000) shares of the Company's common stock at the average of the
closing bid and ask price of the Company's stock on January 1, 2001. This option
will be granted under the Company's 1996 Stock Option Plan. The Company and the
Executive will sign a Stock Option Agreement memorializing the grant as of
January 1, 2001 in the form of the attached Exhibit A upon approval by the Stock
Compensation Committee.

          (b) The Stock Options vested on January 1, 2001. All stock options
held by employee will vest immediately prior to a Change in Control of the
Company.

4. Termination of Employment.

          (a) The employment of the Executive hereunder shall automatically
terminate if the Executive shall die during the Term of Employment. The
employment of the Executive can be terminated for cause by the Company at its
option only for the following:

          (1) the conviction of the Executive under state or federal law of a
felony or other crime, or the equivalent under foreign law; unless in any such
case Executive performed such act in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the Company;

          (2) the material breach by Executive of any provision of the Agreement
which has not been cured pursuant to the provisions of Section 5 hereof; or

          (3) a determination or request by an appropriate regulatory authority
that the Executive be removed or disqualified from acting as an officer of the
Company.

          (b) If the Executive's employment is terminated for other than cause
by the Company, then the Executive is entitled to severance payments equal to
the lesser of (i) four (4) months of the current base salary payable in a lump
sum payment on the last day of the thirty (30) day notice period or (2) the
remaining current base salary for the term of this agreement payable in a lump
sum payment on the last day of the thirty (30) day notice period. In such event,
the Executive shall have the right to continue coverage, at his expense, under
group life insurance, medical, and dental healthcare plans of the Company by
paying the applicable group premium(s) as if the Executive were still employed;
such right, if exercised within thirty days after termination of employment,
shall continue until the Executive reaches the age of 65, at which time it shall
terminate.

          (c) The Executive shall have the right at his sole option to terminate
his employment at any time upon ninety (90) days written notice or for such
other notice period to be determined by the President and CEO in his sole
discretion.

          (d) If within twelve (12) months of a Change in Control, as that term
is defined herein, Executive's employment is terminated for other than cause or
Executive refused to accept or voluntarily resigns from a position other than a
Qualified Position, as that term is defined herein, Executive shall receive
severance compensation equal to twelve (12) months of his then current base
salary. A "Change in Control" means the acquisition, directly or indirectly of
more than 40% of the outstanding shares of any class of voting securities of the
Company by one person or one entity that is not an existing shareholder as of
the date of this Agreement, or a merger, consolidation or sale of all or
substantially all of the assets of the Company, such that the individuals
constituting the Board of the Company immediately prior to such period shall
cease to constitute a majority of the Board, unless the election of each
director who was not a director prior thereto was approved by vote of at least
two-thirds of the directors then in office who were directors prior to such
period. Notwithstanding the foregoing, an acquisition of the requisite
percentage of voting securities in connection with a public offering of
securities by the Company for the primary purpose of providing capital resources
to the Company shall not be considered a "Change in Control" for purposes of
this Section 4(d). "Qualified Position" is an executive officer position with
the entity surviving the Change in Control with substantially the same
responsibilities as those held by the Executive on the date of

                                       2
<PAGE>   3

the Change in Control. Also, notwithstanding the foregoing, if the Company
determines that the amounts payable to Executive under this employment
agreement, when considered together within the other amounts payable to
Executive as a result of a Change in Control, cause such payments to be treated
as excess parachute payments within the meaning of Section 280G .of the Internal
Revenue Code, the Company shall reduce the amount payable to Executive under
this Section 4(d) to an amount that will not subject Executive to the imposition
of tax under Section 4999 of the Internal Revenue Code; provided, however, that
this provision shall apply only to payments to be made under this employment
agreement and shall not cause the reduction of any other payments to be made to
Executive by the Company.

5. Notice of Breach. The Company and the Executive agree that, prior to the
termination of the Employment Period by reason of any breach of any provision of
the Agreement, the injured party will give the party in breach written notice,
specifying such breach and permitting the party in breach to cure such breach
within period of thirty (30) days after receipt of such notice, except a breach
by Executive of provisions of Section 7 of this Agreement shall not have a cure
period.

6. Indemnification.

          (a) If, after the date of the commencement of the Employment Period,
the Executive is made a party or is threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director or officer of
the Company or is or was serving at the request of the Company as a director,
officer, member, employee or agent of another corporation or partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether or not the basis of such Proceeding is an alleged act or
failure to act in an official capacity as a director, officer, member, employee
or agent, he shall be indemnified and held harmless by the Company to the
fullest extent authorized by Delaware law, as the same exists or may hereafter
be amended, against all expense, liability and loss (including, without
limitation, attorney's fees, judgments, fines and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Executive in connection
herewith, including, without limitation, payment of expenses incurred in
defending a Proceeding prior to the final disposition of such Proceeding
(subject to receipt of an undertaking by the Executive to repay such amount if
it shall ultimately be determined that the Executive is not entitled to be
indemnified by the Company under Delaware law), and such indemnification shall
continue as to the Executive even if he has ceased to be a director, officer,
member, employee or agent of the Company or other enterprise and shall inure to
the benefit of his heirs, executors and administrators.

          (b) The right of indemnification and the payment of expenses incurred
in defending a Proceeding in advance of its final disposition conferring in this
Section 6 shall not be exclusive of any other right that the Executive may have
or hereafter may acquire under any statute, provision of the Certificate of
Incorporation or Bylaws of the Company, agreement, vote of shareholders or
disinterested directors or otherwise.

7. Trade Secrets of the Company, Patents and Inventions.

          (a) Except as required by the performance of the Executive's services
to the Company under the terms of this Agreement, neither the Executive or any
of his agents or representatives, shall, during his employment and for so long
afterwards as the pertinent information or data remain Confidential Information,
directly or indirectly, make use of, permit others to use, divulge, disseminate,
copy or otherwise disclose the Company's Confidential Information and/or
Inventions as defined by subparagraphs (i) and (ii), respectively.

          (i) "Confidential Information" means all information and material
which is proprietary to the Company, whether or not marked as "confidential" or
"proprietary" and which is disclosed to or obtained from the Company by the
Executive, which relates to the Company' past, present or future research,
development or business activities. Confidential Information is all information
or materials prepared by or for the Company and includes, without limitation,
all of the following: designs, drawings, specifications, techniques, models,
data, source code, object code, documentation, diagrams, flow charts, research,
development, processes, systems, methods, machinery, procedures, "know-how", new
product or new technology information, formulas, patents, patent applications,
product prototypes, product copies, cost of

                                       3
<PAGE>   4

production, manufacturing, developing or marketing techniques and materials,
cost of production, development or marketing time tables, customer lists,
strategies related to customers, suppliers or personnel, contract forms, pricing
policies and financial information, volumes of sales, and other information of
similar nature, whether or not reduced to writing or other tangible form, and
any other Trade Secrets, as defined by subparagraph (iii), or non-public
business information. Confidential Information does not include any information
which (1) was in the lawful and unrestricted possession of the Executive prior
to its disclosure by the Company, (2) is or becomes generally available to the
public by acts other than those of the Executive after receiving it, or (3) has
been received lawfully and in good faith by the Executive from a third party who
did not derive it from the Company.

          (ii) "Inventions" means and all discoveries, concepts and ideas,
whether patentable or not, including but not limited to, processes, methods,
formulas, compositions, techniques, articles and machines, as well as
improvements thereof or "know-how" related thereto, relating at the time of
conception or reduction to practice to the business engaged in by the Company,
or any actual or anticipated research or development by the Company.

          (iii) "Trade Secrets" shall mean any scientific or technical data,
information, design, process, procedure, formula or improvement that is
commercially available to the Company and is not generally known in the
industry.

Materials involving Confidential Information and Inventions are the exclusive
property of the Company and shall not be removed under any circumstances from
the premises of the Company where the work is being carried on without prior
written consent of the Company except when consistent with the Company's normal
business practices.

          (b) The Executive agrees that any inventions made, conceived or
completed by him during the term of his employment, solely or jointly with
others, which are made with the Company's equipment, supplies, facilities or
Confidential Information, or which relate at the time of conception or reduction
to purpose of the invention to the business of the Company or the Company's
actual or demonstrably anticipated research and development, or which result
from any work performed by the Executive for the Company, shall be the sole and
exclusive property of the Company. The Executive promises to assign such
inventions to the Company. The Executive also agrees that the Company shall have
the right to keep such inventions as trade secrets, if the Company chooses. The
Executive agrees to assign to the Company the Executive's rights in any other
inventions where the Company is required to grant those rights to the United
States government or any agency thereof. In order to permit the Company to claim
rights to which it may be entitled, the Executive agrees to disclose to the
Company in confidence all inventions which the Executive makes arising Out of
the Executive's employment and all patent applications filed by the Executive
within one year after the termination of his employment.

          (c) The Executive shall assist the Company in obtaining patents on all
inventions, designs, improvements and discoveries patentable by the Company in
the United States and in all foreign countries, and shall execute all documents
and do all things necessary to obtain letters patent, to vest the Company with
full and extensive title thereto, and to protect the same against infringement
by others.

8. Severability. In the event that any provisions or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, in whole or
in part, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.

9. Assignment. The rights of the Company (but not its obligations) under this
Agreement may, without the consent of the Executive, be assigned by the Company
to any parent, subsidiary, or a successor of the Company; provided that such
parent, subsidiary or successor acknowledges in writing that it is also bound by
the terms and obligations of this Agreement. Except as provided in the preceding
sentence, the Company may not assign all or any of its rights, duties or
obligations hereunder without the prior written consent of the Executive. Except
as provided for in Section 11 hereunder, the Executive may not assign all or any
of his rights, duties or obligations hereunder without the prior written consent
of the Company.

                                       4
<PAGE>   5

10. Survival of Certain Provisions. The covenants and agreements set forth in
Paragraph 7 of this Agreement shall survive termination of the Executive's
employment and/or this Agreement, and shall remain in full force and effect
regardless of the cause of such termination.

11. Beneficiaries: References. The Executive shall be entitled to select (and
change) a beneficiary or beneficiaries to receive any compensation or benefit
payable following the Executive's death, and may change such election, in either
case, by giving the Company written notice thereof. In the event of the
Executive's death or a judicial determination of his incompetence, reference in
this Agreement shall be deemed, where appropriate, to refer to the Executive's
beneficiary, estate, committee, conservator or other legal representative.

12. Notices. All notices, requests, demands and other communications shall be in
writing and shall be defined to have been duly given if delivered or if mailed
by registered mail, postage prepaid;

          (a) If to the Executive, addressed to him at the following address as
may be changed in writing from time to time:

                   David H. Pohl
                   2528 Luciernaga Street
                   Carlsbad, CA 92009

          (b) If to the Company, addressed to:

                   Patriot Scientific Corporation
                   10989 Via Frontera
                   SanDiego, CA 92127

or to such other address as any party may request by notice given as aforesaid
to the other parties hereto.

13. Titles and Headings. Titles and heading to paragraphs hereof are for the
purposes of references only and shall in no way limit, define or otherwise
effect the provisions hereof.

14. Governing Law. This Agreement is being executed and delivered and is
intended to be performed in the State of California, and shall be governed by
and construed in accordance with the laws of the State of California.

14.5 Arbitration/Sole Remedy for Breach of Agreement. In the event of any
dispute between the Company and the Executive concerning any aspect of the
employment relationship, including any disputes upon termination, all such
disputes shall be resolved by binding arbitration before a single neutral
arbitrator. The arbitrator shall be selected from the "American Arbitration
Association." The arbitration shall be held in San Diego, California. The
arbitrator is bound to rule only on whether or not there has been a violation of
the terms of this employment agreement and to render an award, if any, that is
consistent with the terms of this employment agreement. Neither party to this
employment agreement is entitled to any legal recourse or rights or remedies
other than those provided within this employment agreement. The Executive's sole
remedies, are those set forth in this employment agreement. The arbitrator shall
determine a "prevailing party" and shall award such prevailing party (i)
attorney's fees and costs and (ii) the prevailing party's portion of the costs
of arbitration.

In the event of any dispute between the Company and the Executive concerning any
ownership, use or disclosure of the Company's Confidential Information or other
intellectual property, the requirement of arbitration may be waived, at the
Company's sole election, and any such dispute may be brought before a court
having jurisdiction of the matter.

15. Counterparts. This Agreement shall be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall not be necessary
in making proof of this Agreement to produce or account for more than one
original counterpart.

                                       5
<PAGE>   6

16. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto and may be modified or amended only by a written instrument
executed by the parties hereto. Effective on the first day of the Employment
Period, any prior employment agreements between the Company and the Executive
shall terminate.

17. Good Faith. Each of the parties hereto agrees that he or it shall act in
good faith in all actions taken under this Agreement.

18. Waiver. No waiver of any of the provisions of this Agreement shall be deemed
to be or shall constitute a waiver of any other provision of the Agreement,
whether or not similar, nor shall any waiver constitute a continuing waiver. No
waiver of any provision of this Agreement shall be binding upon the parties
hereto unless it is executed in writing by the party making the waiver.

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

                                     Patriot Scientific Corporation
                                     By

                                     /s/  RICHARD G. BLUM

                                     Richard G. Blum, Chairman & CEO

                                      /s/  DAVID H. POHL

                                     David H. Pohl, Executive

                                       6

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